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Issues: (i) Whether a civil suit for recovery of money, where the underlying liability was disputed and not admitted by the sick industrial company, was barred by Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985; and whether the decree passed in such suit was coram non-judice. (ii) Whether the High Court was justified in awarding 24% compound interest on the decretal amount under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, and if the period during which the company remained under BIFR protection was to be excluded.
Issue: Whether a civil suit for recovery of money, where the underlying liability was disputed and not admitted by the sick industrial company, was barred by Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985; and whether the decree passed in such suit was coram non-judice.
Analysis: Section 22(1) protects a sick industrial company only when the statutory stage of BIFR/AAIFR proceedings exists and when the proceeding is of the kind specified in the provision or is ejusdem generis with execution, distress or like coercive action. The protective object is to prevent interference with formulation or implementation of a rehabilitation scheme and to shield the assets of the company from coercive recovery. A mere adjudication of a disputed debt in a civil suit does not, by itself, threaten the assets of the sick company or impede revival; the embargo is directed against coercive enforcement, not the process of determining liability. The suit in question was therefore outside the mischief of Section 22(1), and the decree could not be treated as a nullity on the ground of want of jurisdiction.
Conclusion: The suit was not barred by Section 22(1), and the decree was not coram non-judice.
Issue: Whether the High Court was justified in awarding 24% compound interest on the decretal amount under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, and if the period during which the company remained under BIFR protection was to be excluded.
Analysis: The 1993 Act mandates interest, including compound interest with monthly rests, on delayed payments to a supplier, but its operation has to be harmonised with the protective regime under the 1985 Act. While the rate of 24% compound interest was upheld as being within the statutory scheme, the period during which the buyer-company remained a sick industrial company under BIFR protection could not be treated as a period for calculating interest, because recovery during that period was legally suspended and the dues could not be realised by coercive process. Interest, therefore, could run only outside the BIFR-protected period.
Conclusion: The rate of 24% compound interest was sustained, but the BIFR-protected period was excluded from computation.
Final Conclusion: The impugned judgment was maintained with the modification that interest would not accrue for the period during which the company remained under BIFR protection, while the decree and the award of compound interest otherwise remained undisturbed.
Ratio Decidendi: Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 suspends coercive recovery proceedings and proceedings that would interfere with rehabilitation, but it does not bar a civil court from adjudicating a disputed liability; interest on delayed payment under the 1993 Act may be awarded only for periods not covered by the statutory suspension under the 1985 Act.
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