Interim stay pending scheme sanction continues on sanction and bars execution; decree supersession is an appealable objection.

An interim stay of proceedings made pending sanction of a company reconstruction scheme continues in force upon sanction and governs enforcement of decrees; accordingly execution permitted despite the sanctioned scheme was set aside. An objection that a decree has been superseded by a sanctioned scheme constitutes a proper objection rendering the execution order appealable. The original stay was construed to bind all creditors, not merely unsecured creditors, so secured creditors were not excluded. Voluntary payments by a judgment-debtor before the scheme date do not operate as waiver of the scheme's protections.

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Issues: (i) Whether execution proceedings against a judgment-debtor should have been stayed by reason of an earlier order staying proceedings pending sanction of a scheme under section 153 of the Companies Act; (ii) Whether an appeal lies against the order permitting execution on the ground that the decree has been superseded by a sanctioned scheme attracting section 47 of the Civil Procedure Code; (iii) Whether the stay order applied only to unsecured creditors or to secured creditors as well; (iv) Whether payments made by a judgment-debtor to a decree-holder amount to a waiver of the rights conferred by the sanctioned scheme.

Issue (i): Whether execution proceedings should have been stayed by the order under section 153 of the Companies Act.

Analysis: The court considered that an order staying all proceedings against the company was made while the petition for sanction of the scheme was pending and remained in force upon sanction; the interim stay could have been vacated only if the court had declined to sanction the scheme, and no separate formal order was necessary after sanction to maintain the effect of the earlier stay.

Conclusion: In favour of Appellant.

Issue (ii): Whether an appeal lies under section 47 of the Civil Procedure Code against the subordinate court's order permitting execution on the ground that the decree was superseded by the sanctioned scheme.

Analysis: The court adopted the view that an objection that a decree has been superseded by a sanctioned scheme constitutes an objection under section 47 of the Civil Procedure Code, making the order amenable to appeal.

Conclusion: In favour of Appellant.

Issue (iii): Whether the stay order related only to unsecured creditors and not to secured creditors.

Analysis: The terms of the earlier order were examined and construed as referring to all creditors; the court rejected the narrower interpretation urged for secured creditors and found no merit in construing subsection (6) of section 153 to limit the stay to unsecured creditors alone.

Conclusion: In favour of Appellant.

Issue (iv): Whether voluntary payment by the judgment-debtor to the decree-holder amounted to waiver of the protections or privileges conferred by the sanctioned scheme.

Analysis: The court held that a judgment-debtor is not prevented from making payment earlier than the date prescribed by the sanctioned scheme and that such a voluntary payment cannot be treated as a waiver of the scheme's terms.

Conclusion: In favour of Appellant.

Final Conclusion: The execution order permitting sale to proceed was set aside and the appeal succeeded; the earlier stay made pending sanction of the scheme continued in effect and governed enforcement of decrees under the sanctioned scheme.

Ratio Decidendi: An interim stay of all proceedings made under the Companies Act pending sanction of a scheme continues in force on sanction and governs enforcement against creditors, and an objection that a decree has been superseded by a sanctioned scheme is a proper objection under section 47 of the Civil Procedure Code.

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