Sanctioned rehabilitation scheme protection bars award execution against a sick company despite delayed payment recovery law

A sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 barred execution and recovery against the sick company because the creditor's award liability was included in that scheme. Section 22 protected the company from distress, execution and similar proceedings during implementation of the scheme unless consent was obtained from the Board or Appellate Authority. The 1993 delayed payments law did not override that protection on these facts; its non obstante clause had to be read harmoniously with the rehabilitation framework of the 1985 Act. The execution proceedings therefore could not be sustained.

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Issues: (i) Whether an award obtained under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 could be executed against a sick industrial company when the liability stood included in a sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985. (ii) Whether the overriding provisions of the 1993 Act displaced the bar contained in section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

Issue (i): Whether an award obtained under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 could be executed against a sick industrial company when the liability stood included in a sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: The liability awarded in favour of the creditor was specifically reflected in the sanctioned rehabilitation scheme as part of the company's creditor liabilities. Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 imposes a statutory bar on execution, distress, recovery and similar proceedings against the properties of the sick company while a sanctioned scheme is under implementation, except with the consent of the Board or Appellate Authority. Once the award was sought to be executed and the amount formed part of the scheme, the execution could not proceed in disregard of that statutory protection.

Conclusion: The execution of the award was barred and the creditor could not proceed against the sick company in the manner adopted.

Issue (ii): Whether the overriding provisions of the 1993 Act displaced the bar contained in section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: The two enactments operate in different fields. The 1993 Act provides a mechanism for adjudication and recovery of delayed payments to small-scale industries, whereas the Sick Industrial Companies (Special Provisions) Act, 1985 is a complete code governing rehabilitation of sick industrial companies. The non obstante clauses had to be read in the statutory context and harmoniously. The later enactment did not, in the circumstances of an already sanctioned rehabilitation scheme covering the liability, override the special protection granted by section 22 of the 1985 Act.

Conclusion: The 1993 Act did not prevail over the bar under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 in the facts of the case.

Final Conclusion: The impugned judgments were set aside, and the creditor's execution could not be sustained in view of the rehabilitation scheme and the statutory protection available to the sick company.

Ratio Decidendi: Where a liability is included in a sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985, section 22 bars execution and recovery proceedings notwithstanding an award obtained under another law, and competing non obstante clauses must be reconciled according to the statutory scheme and purpose.

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