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Issues: (i) Whether the pendency of proceedings before the BIFR/AAIFR attracted the statutory protection under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 so as to restrain continuation of proceedings and execution of the earlier orders; (ii) whether, at the interlocutory stage, the Court should construe the hire purchase agreement and determine whether the plant and machinery belonged to the defendant or remained the plaintiff's property.
Issue (i): Whether the pendency of proceedings before the BIFR/AAIFR attracted the statutory protection under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 so as to restrain continuation of proceedings and execution of the earlier orders.
Analysis: The statutory bar operates where an enquiry under section 16 is pending, a scheme under section 17 is under preparation or consideration, or an appeal under section 25 is pending before the AAIFR. On the facts, the appeal before the AAIFR was pending. The Court treated the defendant as entitled to the benefit of section 22, and held that the earlier order required modification to the limited extent necessary to preserve the statutory protection.
Conclusion: The defendant was held entitled to the protection of section 22, and the order was modified accordingly.
Issue (ii): Whether, at the interlocutory stage, the Court should construe the hire purchase agreement and determine whether the plant and machinery belonged to the defendant or remained the plaintiff's property.
Analysis: The suit itself sought a declaration of ownership, and the issue of title depended upon the true character of the agreement. The Court declined to finally construe the agreement at the interlocutory stage, leaving the question of whether it was a hire purchase transaction or a loan arrangement to be decided at trial. Pending that determination, the ownership dispute was treated as unresolved, and the goods were prima facie regarded as lying with the defendant for the limited purpose of the statutory protection.
Conclusion: The ownership issue was left open for trial, and no final finding was recorded on the character of the agreement.
Final Conclusion: The application succeeded only to a limited extent: the statutory protection under the sick industrial companies regime was recognised, the receiver was directed to retain symbolic possession only, and the defendant was restrained from dealing with the plant and machinery except in the ordinary course of business until disposal of the suit.
Ratio Decidendi: Where proceedings before the AAIFR are pending, the protection under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 applies, and the Court should not finally determine disputed title to the property at an interlocutory stage.
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