TaxTMI 
TaxTMI 
2004 (4) TMI 305
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....t (i.e. an amount of Rs. 5,49,983) was added leading to a claim of Rs. 48,55,943 with further interest at the rate of 18 per cent per annum on the principal amount from the date of filing of the suit till payment and/or realisation. The appeal was admitted on 5th July, 2002 and the impugned decree was directed to be stayed on the Appellant depositing a sum of Rs. 20,00,000 in this Court. The appellant preferred a Special Leave Petition against this conditional order, but the same was dismissed by the Apex Court by its order dated 13th December, 2002. The Apex Court, however, observed that the High Court may consider hearing of the appeal as early as possible. Accordingly the appeal has been heard early. It is, however, material to record that the appellant has not deposited any amount contrary to the order passed at the admission stage. 3. As can be seen from the order of the learned Single Judge, the only submission canvassed before him was that the affairs of the company, to which the equipment was given on lease, were under investigation before the Board for Industrial and Financial Reconstruction ("BIFR" for short) and, therefore, the suit could not proceed against the guara....
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.... lessee discharges all its obligations. (iii )It so happened that Prakash Industries honoured the payment of first 11 instalments whereafter it defaulted. A correspondence ensued between the parties ultimately leading to the Respondent filing a suit in this Court against Prakash Industries bearing Suit No. 4665 of 1997 for various reliefs including recovery of the lease equipment and arrears of the lease rentals. An ad-interim order was passed therein on 18th February, 1998 which recorded a statement on behalf of Prakash Industries that they will not part with possession or in any way sell the property. Subsequently Prakash Industries lodged a reference with BIFR on 12th June, 1998. Consequently Suit No. 4665 of 1997 filed by the Respondent was liable to be suspended under section 22 of SICA. The respondent, therefore, filed Summary Suit No. 6294 of 1999 against the Appellant and took out the Summons for Judgment. The Appellant did not file any affidavit in reply though he was served with the summons and oral submissions were made by his counsel before the learned Single Judge. (iv)As stated earlier, this suit was decreed by the learned Single Judge by his impugned order date....
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....ellate Authority." 6. In this connection, it is material to note that this section has been amended by Act No. 12 of 1994. The following portion, which is in the bracket as shown above, did not exist in the section under initial Act of 1985 and it came to be added by the amendment of 1994. "and no suit for the recovery of money or for the enforcement of any security against the industrial company". Thus, by this amendment, it came to be specifically added that no suit : (a )for the recovery of money; or (b )for the enforcement; (i )of any security against an industrial company; or (ii )of any guarantee in respect of any loans or advances granted to the industrial company; shall lie or be proceeded with except with the consent of the Board or the Appellate Authority. 7. Mr. Samdani, learned counsel for the Appellant, canvassed two propositions. Firstly, he submitted that in view of this amendment, no suit for recovery of any money can proceed after the registration of the reference even against the guarantor and, secondly, the industrial company and the guarantor had to be treated equally in view of the judgment of the Apex Court in the case of Patheja Bro....
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....ike against the properties of the sick industrial company; and (3) Proceedings for the appointment of receiver. 12. Eviction proceedings initiated by a landlord against a tenant company would not fall in categories (1) and (3) referred to above. The question is whether they fall in category (2). It has been urged by the learned counsel for the appellant-company that such proceedings fall in category (2) since they are proceedings against the property of the sick industrial company. The submission is that the leasehold right of the appellant-company in the premises leased out to it is property and since the eviction proceedings would result in the appellant-company being deprived of the said property, the said proceedings would be covered by category (2). We are unable to agree. The second category contemplates proceedings for execution, distress or the like against any other properties of the industrial company. The words 'or the like' have to be construed with reference to the preceding words, namely 'for execution, distress' which means that the proceedings which are contemplated in this category are proceedings whereby recovery of dues is sought to be made by way of execut....
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....e covered thereby the suit for enforcement of a guarantee should be against the industrial company only. The protection will be available to a guarantor also. It is material to note that in Patheja Brothers, there was no dispute that repayment of a loan was guaranteed by the guarantor. The only question was whether the guarantor was also entitled to protection after the amendment of the section against a suit for enforcing the guarantee and the answer was in the affirmative. 11. In PICUP's case ( supra), the Court noted that there is a distinction when it comes to the protection granted to the industrial company and to the guarantors. As far as the industrial companies are concerned, it was already provided before the amendment of the section that no proceeding for the winding up or for execution, distress or like against its properties or for appointment of receiver would lie. Over and above that, it was further added by the amendment that as far as the industrial companies are concerned, no suit also would be permitted for the recovery of money or for enforcement of any security against it. As far as the guarantors are concerned, the amendment extended this protection concerni....
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....A as decided in Chamundi Moped (supra). When it comes to the proceedings against the industrial company, the expression must be widely construed because the basic idea is to revive the sick industry as held in Maharahstra Tubes. If there is any loan or advance granted to an industrial company and it is guaranteed to be repaid by a guarantor, no suit for enforcement of such a guarantee will lie against the guarantor also. This was held in Patheja Brothers. And lastly, as held in PICUP, the protection under amended section 22(1) is not available to the guarantors, when it comes to execution proceedings. The effect of the amendment is to stall suits of the particular type but not the recovery proceeding against the guarantor. The upshot of the above discussion is that firstly execution or recovery proceedings on the basis of existing decree is not at all covered by the Amendment of 1994. When it comes to guarantors, it is only the suits for enforcement of any guarantee which would be stayed as against them provided they are in respect of loans or advances granted to the industrial company. Thus it is not that merely because the industrial company has become sick that the suits against....
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....ion of the learned counsel. However, we are unable to agree with the same for more than one reason. Firstly, it is a well settled principle of interpretation that when the language of the section is clear and unambiguous then it should be interpreted on the basis of plain reading thereof and no other aid or interpretation can be put in operation. We find that provisions of section 22, particularly the amended portion thereof are plain and clear and are unambiguous and on a plain and clear reading of the section it is clear that the words "for the recovery of money" apply only in case of a suit against an industrial company and do not apply to the case of the guarantors. In view of the said clear and plain language, we do not see any reason for taking aid of mischief rule in the present case. Thus, the judgment of the Apex Court cited by the learned counsel has no application in the facts and circumstances of the present case. Secondly, in the case of PICUP (supra) the Hon'ble Supreme Court of India has already held that the Legislature by an amendment to section 22 intended to provide only limited protection to the guarantor i.e., in respect of suits for loans and advances guarante....
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.... was a loan on the security of the goods. If there is a bona fide and completed sale of goods, evidenced by documents, anterior to and independent of a subsequent and distinct hiring to the vendor, the transaction may not be regarded as a loan transaction, even though the reason for which it was entered into was to raise money." (p. 1185) They also referred to a judgment of the House of Lords in the case of De Vigier v. Inland Revenue Commissioners [1964] 1 WLR 1973 to the effect that it matters not how you describe the transaction and it is the purpose thereof which is got to be seen. 17. Mr. Samdani and Mr. Purandare pointed out that the entire amount involved in the transaction was divided into 20 equated instalments and interest was payable thereon, if the lessee made any default in payment of the money or the instalment. Last part of this clause 22 on interest and cost reads as follows : "Interest rates will be subject to modification downwards/upwards during lease tenure if there is a downward/upward revision in the interest rates by the bank financing the lease transaction." Similarly clause 27, which was with respect to termination on default, provided that upon....
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....se of equipment ? He, therefore, submitted that to begin with what one must see is as to what is understood by the industrial company itself and what was the understanding of the Respondent who had entered into the transaction with the industrial company. As far as the respondent is concerned undoubtedly it was their case that it was an Agreement of Lease. However, Mr. Coolabawala submitted that even when one sees the treatment given by the industrial company to the transaction, it would be seen that it always treated it as a lease. For that purpose, Mr. Coolabawala drew our attention to the reply of the advocate of Prakash Industries to the advocate of the respondent dated 21st July, 1997, which was annexed as Exhibit-J to the Plaint. The reply specifically refers to he document governing the transaction as the Lease Agreement and at no place it states that it was a loan or a financial transaction. Similarly, it could not be considered as an advance because in an advance, the right of the financier is only in respect of money and not in the property against which the money is advanced. 20. Thereafter, Mr. Coolabawala drew our attention to the specific clauses of the Lease Agree....
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.... clear, namely that it was a document of lease and not finance. 21. Mr. Coolabawala then referred to an unreported detailed order of a Single Judge (S.H. Kapadia, J., as His Lordship then was in this Court) dated 16th September, 1998 on Notice of Motion No. 2346 of 1998 in Suit No. 3196 of 1998 filed by Development Credit Bank against the very Prakash Industries Ltd. In that matter also, the suit was for recovery of possession of four Wind Electric Generators leased to Prakash Industries under the Lease Agreement. Since there was a default in making the payment of the lease rentals, a Receiver was sought. An almost identical Lease Agreement was entered into between the parties. The bank concerned had not sued to recover the amounts inasmuch as Prakash Industries had filed a reference before the BIFR. Notice of Motion No. 2436 of 1998 was moved for Receiver of the equipment. In para 4 of the order, the learned Judge squarely raised the question as to whether the above Lease Agreement constituted a financial agreement and not a lease agreement. The Court noted the submissions that the Court was expected to go behind the terms and conditions of the agreement to ascertain as to whet....
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....nt. Besides, the guarantee given by the appellant is an independent guarantee given to the Respondent. It clearly states in terms that it is as if given by the principal debtor and it will be irrevocable until the lessee discharges all the obligations. The Apex Court in some of the recent judgments has laid down the guidelines when it comes to interpreting the documents entered into between the parties. In para 10 of the judgment in the case of M. Arul Jothi v. Lajja Bai AIR 2000 SC 1122, the Apex Court has observed that "once parties enter into a contract, then every word stated therein has to be given its due meaning which reveals the rights and obligations between the parties. No part of the agreement or words used therein could be said to be redundant." In para 16 of Roop Kumar v. Mohan Thedani [2003] 6 SCC 595, the Apex Court observed the following: ". . .when persons express their agreements in writing, it is for the express purpose of getting rid of any indefiniteness and to put their ideas in such shape that there can be no misunderstanding, which so often occurs when reliance is placed upon oral statements. Written contracts presume deliberation on the part of the contr....