Court dismisses application to reject counter-claim, ruling lack of merit. Plaintiff's recovery claim unaffected.

The court dismissed the application for rejection of the counter-claim under Section 22 of the Sick Industrial Companies Act, ruling it lacked merit. The plaintiff's claim for recovery and the defendants' counter-claim were not part of the ongoing proceedings before the Board of Industrial and Financial Reconstruction (BIFR). As the defendants had not approached BIFR and the plaintiff did not admit the counter-claim, the court held that the counter-claim was not covered by the sanctioned scheme and therefore not subject to Section 22(1) of the Act. The case proceeded for further proceedings as scheduled.

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Issues involved:
Application for rejection of counter-claim under Section 22 of the Sick Industrial Companies Act, 1985.

Analysis:
The plaintiff sought recovery of a specific amount from the defendants, while the defendants filed a counter-claim for a different amount. The plaintiff contended that the counter-claim should be rejected as permission from the Board of Industrial and Financial Reconstruction (BIFR) under Section 22 of the Sick Industrial Companies Act had not been obtained by the defendants. The plaintiff's claim was based on goods supplied to the defendant, with a principal sum remaining due. On the other hand, the defendant argued that after considering debit and credit notes, a different amount was payable to them by the plaintiff. The plaintiff had initiated proceedings before BIFR, but no scheme had been approved for its rehabilitation. The defendants sought adjustment of the principal amount claimed in the suit, alleging a sum due to them from the plaintiff based on credit notes issued during a specific period.

The legal issue centered around Section 22 of the Sick Industrial Companies Act, which restricts legal proceedings against a company under certain circumstances. The defendants relied on a Supreme Court decision emphasizing the importance of the scheme sanctioned by BIFR and the inclusion of dues in that scheme. The court referred to previous judgments to clarify that a mere pendency of an inquiry is not sufficient to stay legal proceedings under Section 22; the dues must be included in the sanctioned scheme. In this case, the plaintiff disputed the counter-claim, asserting they were entitled to recover a specific amount from the defendants. Since the plaintiff did not admit the counterclaim and the defendants had not approached BIFR, the claim was not part of the ongoing proceedings before BIFR. Therefore, the court concluded that the counter-claim would not be covered by the sanctioned scheme and, thus, not hit by Section 22(1) of the Act.

The court dismissed the application for rejection of the counter-claim, stating it was devoid of merit. The case was scheduled for further proceedings, including admission/denial of documents and framing of issues on specific dates. The judgment clarified the application of Section 22 of the Sick Industrial Companies Act in the context of the dispute between the plaintiff and defendants, emphasizing the importance of the sanctioned scheme by BIFR and the inclusion of dues in that scheme for legal proceedings to be stayed.

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