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Issues: (i) Whether an application under Order XXXIX, Rule 4 of the Code of Civil Procedure, 1908 was maintainable during the operation of the bar under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985; (ii) Whether the ex parte restraint order deserved to be vacated on the ground of alleged concealment and misrepresentation.
Issue (i): Whether an application under Order XXXIX, Rule 4 of the Code of Civil Procedure, 1908 was maintainable during the operation of the bar under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
Analysis: Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 was held to create a complete embargo on proceedings for recovery, enforcement of security, execution and allied steps against a sick industrial company once the statutory conditions were satisfied, except with the consent of the Board. The scheme of the Act, including the provisions concerning inquiry, rehabilitation, winding up, suspension of contracts and restraint on disposal of assets, showed that the protective mechanism was intended to preserve the asset base of the sick company and prevent dissipation pending consideration of rehabilitation or winding up. Unlike the stay regime under section 10 of the Code of Civil Procedure, 1908, the statute did not contemplate continuation of ancillary interlocutory proceedings in a pending suit without the Board's consent. The bar was therefore treated as extending to the present application as well.
Conclusion: The application under Order XXXIX, Rule 4 of the Code of Civil Procedure, 1908 was not maintainable and the issue was decided against the applicant.
Issue (ii): Whether the ex parte restraint order deserved to be vacated on the ground of alleged concealment and misrepresentation.
Analysis: The alleged non-disclosure of certain payments and the pledged shares was not found sufficient to justify vacation of the restraint order. The statement of account reflected the payments received and adjusted them against the outstanding dues. The shares were found to be linked to a company controlled by the guarantor and their transfer was not shown to have been practically available to the plaintiff. The guarantor had also undertaken not to dispose of the property without the plaintiff's prior written consent. In the circumstances, the Court found no equitable ground to discharge the restraint, especially when the applicant had already invoked the statutory bar under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
Conclusion: No case for vacation of the ex parte restraint order was made out and the issue was decided against the applicant.
Final Conclusion: The interlocutory challenge failed both on maintainability and on merits, and the restraint on alienation of property was left undisturbed.
Ratio Decidendi: Where section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 is operative, proceedings covered by the statutory bar cannot be continued by resort to ancillary interlocutory applications, and an injunction will not be vacated absent a clear equitable or legal basis.
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