Sick Industries—Stay of Execution proceedings comes into operation on registration of reference before Board and not after being declared as Sick Industry.

Mr. Anil Kshetarpal, J.:- By this common judgment, CR Nos.2628 and 2629 of 2017 shall stand disposed of as common issue arises for determination and the parties as well as the counsels are same.

2. The issue which arises for determination is whether on the registration of the reference under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter to be referred as “the Act of 1985”), Section 22 of the Act of 1985 comes into the operation and execution of a Civil Court decree for recovery of the amount can be continued or not? In the present case, the Executing Court has refused to stay the execution proceedings on the following two grounds:-

1. The reference has only been registered. The Judgment Debtor Company has not been declared Sick Company within the meaning of the Act of 1985.

2. Since, the Decree Holder was not the party to the proceedings before the Board for Industrial and Financial Reconstruction, therefore, such registration of the reference, if any, is not binding on the Decree Holder.

3. Learned Executing Court has clearly overlooked the provisions of the Act of 1985. Section 16 of the Act of 1985, which enables the Board i.e. Board for Industrial and Financial Reconstruction to make such an enquiry as it may deem fit for determining whether any industrial company has become Sick Industrial Company or not. Section 16 of the Act of 1985 is extracted as under:-

“16. Inquiry into working of sick industrial companies.— (1) The Board may make such inquiry as it may deem fit for determining whether any industrial company has become a sick industrial company—

(a) upon receipt of a reference with respect to such company under section 15; or

(b) upon information received with respect to such company or upon its own knowledge as to the financial condition of the company.

(2) The Board may, if it deems necessary or expedient so to do for the expeditious disposal of an inquiry under subsection (1), require by order any operating agency to enquire into and make a report with respect to such matters as may be specified in the order.

(3) The Board or, as the case may be, the operating agency shall complete its inquiry as expeditiously as possible and endeavour shall be made to complete the inquiry within sixty days from the commencement of the inquiry. 1 [Explanation.—For the purposes of this sub-section, an inquiry shall be deemed to have commenced upon the receipt by the Board of any reference or information or upon its own knowledge reduced to writing by the Board.]

(4) Where the Board deems it fit to make an inquiry or to cause an inquiry to be made into any industrial company under sub-section (1) or, as the case may be, under subsection (2), 2 [it may appoint] one or more persons to be a special director or special directors of the company for safeguarding the financial and other interests of the company 1 [or in the public interest].

1[(4A) The Board may issue such directions to a special director appointed under sub-section (4) as it may deem necessary or expedient for proper discharge of his duties.]

(5) The appointment of a special director referred to in subsection (4) shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or in any other law for the time being in force or in the memorandum and articles of association or any other instrument relating to the industrial company, and any provision regarding share qualification, age limit, number of directorships, removal from office of directors and such like conditions contained in any such law or instrument aforesaid, shall not apply to any director appointed by the Board.

(6) Any special director appointed under sub-section (4) shall—

(a) hold office during the pleasure of the Board and may be removed or substituted by any person by order in writing by the Board;

(b) not incur any obligation or liability by reason only of his being a director or for anything d