Back
1995 Supreme(Cal) 305
Calcutta High Court
SHYAMAL KUMAR SEN, J.
Engineering Construction Services - Appellant
Versus
Mining and Allied Machinery Corporation Ltd. - Respondents
Award Case No. 349 of 1992
Decided On : 11 August 1995
Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 bars any legal proceedings for execution, distress or the like against the properties of a sick industrial company without the consent of the Board for Industrial and Financial Reconstruction (BIFR).
Headnote:
SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 - SECTION 22 - EXECUTION PROCEEDINGS - STAY OF - WINDING UP OF COMPANY - PENDING BEFORE BIFR - CONSENT OF BIFR NOT OBTAINED - EXECUTION PROCEEDINGS NOT MAINTAINABLE.
Fact of the Case:
A decree-holder filed an application for execution of a money decree against a judgment-debtor company which was declared as a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The reference for determination of measures to be adopted with respect to the company was made to the Board for Industrial and Financial Reconstruction (BIFR) under Section 15 of the SICA. The BIFR, after conducting an inquiry, came to a prima facie conclusion that it was not practicable for the company to make its net worth positive and that it was just and equitable to wind up the company. A public notice was issued for winding up of the company under Section 20 of the SICA. However, the company filed a writ petition in the High Court challenging the validity of the BIFR's order and obtained an interim order restraining the BIFR from proceeding further on the basis of the winding up order. The judgment-debtor company contended that in view of the provisions of Section 22 of the SICA, the execution proceedings were not maintainable and should be stayed.
Finding of the Court:
The High Court held that the execution proceedings were not maintainable since no approval of the BIFR had been obtained prior to proceeding in execution. The Court observed that Section 22 of the SICA expressly barred any legal proceedings for execution, distress or the like against the properties of a sick industrial company without the consent of the BIFR. The Court further held that the inquiry under Section 16 and the scheme referred under Section 17 of the SICA were still under consideration and final approval of the BIFR had not been obtained. Therefore, the provisions of Section 22 of the SICA were attracted in the present case.
Issues: Whether the execution proceedings were maintainable in view of the provisions of Section 22 of the SICA.
Ratio Decidendi: The Court held that the execution proceedings were not maintainable since the decree-holder had not obtained the consent of the BIFR prior to proceeding in execution. The Court observed that Section 22 of the SICA expressly barred any legal proceedings for execution, distress or the like against the properties of a sick industrial company without the consent of the BIFR. The Court further held that the inquiry under Section 16 and the scheme referred under Section 17 of the SICA were still under consideration and final approval of the BIFR had not been obtained. Therefore, the provisions of Section 22 of the SICA were attracted in the present case.
Final Decision: The High Court dismissed the decree-holder's application for execution and allowed the judgment-debtor's application for stay of the execution proceedings.
ORDER :- On or about March 28, 1995 an execution application was moved without notice with an intent to put the decree dated April 21, 1994 into execution as against the judgment-debtor. The decree arises out of an award of the sole arbitrator in Award Case No. 349 of 1992 and is a money decree.
2. On the said application for execution, an ad interim order was passed by me directing the State Bank of India, Park Street, Calcutta not to part with the money in question till March 31, 1995 and the matter was adjourned till March 30, 1995. In the meantime, the judgment-debtor also moved an application alleging inter alia following points:
(a) No execution proceeding would lie or be proceeded with as against the respondent herein in view of Section 22 of the Sick Industrial Companies (Special Provision) Act, 1985 and that the proceeding before the Board for Industrial and Financial Reconstruction (BIFR) is still pending. The decree holder does not have any right to put the decree into execution.
(b) It was submitted that the order dated March 29, 1995 on the Execution Application should be vacated and the execution application itself is liable to be dismissed or permanently stayed so long and until proceeding at BIFR is finally dispose of or is finally concluded.
3. On 30th March, 1995 the following order was passed modifying the earlier ad interim order.
"Affidavit in opposition is to be filed by 10-4-95. Affidavit in Reply by 17-4-95 and the matter is adjourned till 18-4-95.
The ad interim order passed on 28-3-95 stands modified to the extent that State Bank of India, Park Street, Branch, Calcutta C and I Division Appejay House will hold a sum of Rs. 2,50,000/ - until further orders.
All parties to act on a signed copy of the minutes of this order on the usual undertaking."
4. On April 4, 1995 an application was made by the judgment-debtor for dismissal of the application for execution and for setting aside of the above orders passed in the said execution proceedings on the ground that by reason of the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, the said application for execution would not lie and no orders could be passed thereon. On the said application an order was passed on April 4, 1995 wherein the order dated 28-3-95 was stayed on the condition that in the event any money was withdrawn by the judgment-debtor from the concerned account, the same would be kept in a fixed deposit account and advocate on record of the judgment-debtor would intimate the opening of such fixed deposit account if the same took place. Till date no intimation of any fixed deposit account has been given.
5. The following questions arise for determination in the instant proceeding :
(a) Whether the execution proceeding would lie or be proceeded with as against Mining and Allied Machinery Corporation Ltd., which is under BIFR and proceeding whereof are still pending.
(b)Whether Section 22 of the said Act would enable any decree-holder to put the Money Decree into execution for attachment or payment out of the properties, movable or immovable of the respondent, the petitioner herein.
(c) Whether the execution proceeding filed against the respondent Corporation is liable to be stayed and/or suspended under the provision of the Act.
(d) Whether any interim order having an effect of executing the said decree and securing the said decree in course of execution should be stayed and/or vacated in the facts of the case.
(e) Whether the order dated March 28, 1995 as modified on March 30, 1995 be vacated and / or stayed.
6. The contention of the learned Advocate for the judgment-debtor MAMC Ltd. may be summarised as follows :
(a) M.A. M.C. is a declared sick Industrial undertaking and is entitled to the benefit of Section 22 of Sick Industrial Companies (Special Provisions) Act, 1985.
(b) Under Section 22 of the said Act this is squarely applicable in the instant case with regard to M.A.M.C. Ltd. The decree holder cannot
