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2024 Supreme(Online)(SC) 1
SUPREME COURT OF INDIA
J. B. PARDIWALA, J
FERTILIZER CORPORATION OF INDIA LIMITED – Appellant
Versus
M/S COROMANDAL SACKS PRIVATE LIMITED – Respondent
Civil Appeal Nos. 5366-5367 of 2024
For the Appellants/Petitioners: Ms. Malvika Trivedi
For the Respondents: Mr. Sundeep Pothina
Suspension of legal proceedings for sick industrial companies is pivotal under Section 22(1) of the 1985 Act, emphasizing rehabilitation, while interest claims must acknowledge non-execution during the sickness period.
Headnote:(A) Sick Industrial Companies (Special Provisions) Act, 1985 - Section 22(1) - Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 - Dispute regarding recovery of dues - Legal proceedings under Section 22(1) remain suspended while company is a sick industrial company - Suit was decreed in favor of plaintiff but interest of 24% with monthly compounding was awarded, with exclusion of period during which the company was declared sick. (Paras 142-144)
(B) Legal Principle - The suspension of legal proceedings against sick companies does not bar suit for recovery of money; however, obtaining consent from the BIFR is essential for execution until the company ceases to be sick. (Paras 119-121)
(C) Findings - The defendants must pay principal amount with interest calculated up to when company was declared non-sick. The stay on proceedings justified under S. 22 during rehabilitation period is essential to ensure revival efforts are not frustrated. (Paras 142-144)
| Table of Content |
|---|
| 1. establishment of factual context including parties. (Para 2 , 3 , 4 , 5 , 6) |
| 2. arguments on statutory provisions and precedence. (Para 20 , 21 , 22 , 23) |
| 3. analysis of industrial sickness and legal frameworks. (Para 39 , 46 , 48) |
| 4. interpretation of section 22(1) and its application. (Para 62 , 128) |
| 5. final decree and order regarding interest. (Para 142 , 143 , 144) |
J. B. PARDIWALA, J.:
For the convenience of exposition, this judgment is divided into the following parts: -
| INDEX | A. FACTUAL MATRIX | ............................................................................................. | 2 |
|---|---|---|---|
| B. SUBMISSIONS ON BEHALF OF THE APPELLANTS/ORIGINAL DEFENDANTS | 10 | ||
| C. SUBMISSIONS ON BEHALF OF THE RESPONDENT/ORIGINAL PLAINTIFF | 15 | ||
| D. ANALYSIS | 19 | ||
| a. | Concept of Interest | 68 | |
| E. CONCLUSION | 90 | ||
| A. | FACTUAL MATRIX | ||
| i. | Case of the original plaintiff before the trial court | 4 | |
| ii. | Case of the original defendants before the trial court | 6 | |
| iii. | Appeals before the High Court | 9 | |
| i. | Proceedings in respect of FCIL before the BIFR | 19 | |
| ii. | Issues for Determination | 21 | |
| iii. | Overview of Industrial Sickness and the Legislative Scheme of the 1985 Act. | 22 | |
| iv. | ISSUE NO. 1: Whether the suspension of legal proceedings as envisaged under Section 22(1) of the 1985 Act would extend to a civil suit for recovery of money even if the debt sought to be proved in the plaint has not been admitted by the sick industrial company? If so, whether the decree in favour of the original plaintiff could be said to be coram non-judice? | 29 | |
| v. | ISSUE NO. 2: Whether the High Court was correct in granting 24% Compound Interest on the Principal Decretal Amount in favour of the original Plaintiff? | 68 |
1. Since the issues raised in both the captioned appeals are the same; the parties are also the same and the challenge is also to the self-same impugned common judgment and order passed by the High Court, those were taken up for hearing analogously and are being disposed of by this common judgment and order.
2. The appellants herein are the original defendants and the respondent herein is the original plaintiff.
3. The present appeals arise from the impugned common judgment and order dated 10.06.2022 (“impugned judgment”) passed by the High Court of Telangana at Hyderabad partly allowing the Appeal Suit No. 808 of 2002 and Appeal Suit No. 913 of 2004 respectively preferred by the original defendants and the original plaintiff respectively against the judgment and decree dated 19.09.2001 passed by the Senior Civil Judge, Peddapalli in O.S. No. 37 of 1996 decreeing the suit partly in favour of the original plaintiff.
4. M/s Coromandal Sacks Private Limited, that is, the original plaintiff, is a company registered under the Companies Act, 1956 established with the assistance of the Andhra Pradesh Industrial Development Corporation Limited (“APIDC”) and is engaged in the manufacturing of High Density Poly Ethylene (“HDPE”) bags.
5. Fertilizer Corporation of India Ltd. (“FCIL”), that is, the defendant company, is a Public Sector Undertaking (“PSU”) of the Government of India established for the manufacturing of fertilisers and are operating under the administrative control of the Ministry of Chemicals and Fertilizers, Government of India.
6. The original defendants required HDPE bags for the purpose of packaging and supply of fertiliser to their customers. They had been placing orders for the same with the original plaintiff since 1986-87 onwards. The terms and conditions including the technical specifications of the bags and terms of payment were specified in the notices inviting tender (“NIT”) issued from time to time and the purchase orders issued in pursuance thereof. As per the terms of the NIT, the original defendants were required to make the entire payment within 20 days of the receipt of the bags and approval of the same.
The terms of the purchase orders also entitled the original defendants to deduct up to a maximum of 5% of the contract price towards liquidated damages upon delay in supply of bags
