TaxTMI 
TaxTMI 
2006 (6) TMI 208
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....eries. The legal notice issued by the petitioner/plaintiff did not evoke proper response. The right of the petitioner/plaintiff to re-possess the plant and machineries was opposed and objected to by the respondent. 3. Therefore the petitioner filed a suit in O.S.No.768/1998 on the file of the Sub-Court, Coimbatore and sought for permanent injunction against the respondent not to interfere in any manner or obstruct or prevent them from re-possessing the plant and machineries. 4. It is seen that the respondent filed I.A.No.636/2002 in O.S.No.768/1998 and obtained an order of stay of all proceedings in the suit pending disposal of the case No. 300/1999 on the file of the Board for Industrial and Financial-reconstruction, hereinafter called 'BIFR', at New Delhi. According to the respondent, the company is sick within the meaning of Sick Industrial Companies (Special Provisions) Act, 1 985 (hereinafter called 'the Act') and consequently the provisions of section 22(1) of the Act would apply. 5. As against the order of stay obtained by the respondent in I.A. No.636/2002 the petitioner/plaintiff has filed this Civil Revision Petition. 6. Learned counsel for the petitioner submitted th....
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....company before the BIFR. In the affidavit filed in support of I.A.No.636/2002, it was specifically averred that the defendant company is entitled to protection under section 22(1) of the Act and the suit proceedings ought to be stayed till the case is completed before the BIFR. This Application was resisted by the petitioner/plaintiff stating that section 22(1) of the Act would not be applicable to the present case as the plaintiff is the owner of the machineries and as such the suit proceedings cannot be stayed. 12. The learned trial Judge by order dated 7-4-2003 accepted the contentions of the petitioner/defendant that section 22(1) of the Act would apply to the facts of case and thereby stayed all further proceedings in the suit. 13. The point for consideration before this court is whether the respondent/defendant company is entitled to protection under section 22(1) of the Act. 14. Section 22(1) of the Act is extracted below:- "22. Suspension of legal proceedings, contracts, etc.- (1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is un....
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....70,584 as on 6-6-1998, they are well within their right to repossess the hired machineries as ownership vested with the plaintiff. 18. I find force in the submission of the learned counsel for the petitioner/plaintiff. The suit filed by the plaintiff is not for winding up or for execution, distress or the like against any of the properties of the respondent/defendant. The properties, namely, the machineries are still the properties of the petitioner/plaintiff and the prayer in the suit is only for mere injunction restraining the respondent/defendant from obstructing the repossession of the machineries from the premises of the respondent/defendant. No relief by the petitioner has been sought for, for the recovery of the money or for the enforcement of any security and in such circumstances, section 22(1) of Act will not apply to the facts of this case. 19. In Kotak Mahendra Finance Ltd. (supra), the similar question came up for consideration before the Bombay High Court and it was held as follows:- "7. Section of 22(1) indicates that the following categories of the proceedings are prohibited and liable to be suspended where an inquiry under section 16 is pending or any scheme und....
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....mendment Act, 1993 section 22(1) was amended and, 'and no suit for the recovery of money or for the instrument of any security against the industrial company or guarantee in respect of any loans or advances granted to the industrial company' was inserted after, 'no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of receiver in respect thereof', but the said amendment cannot be of any help to the lessee company because as observed above, so far as finance company is concerned it has not filed any suit against the lessee company for recovery of money against the industrial company or for enforcement of any security against the lessee company or for enforcement of guarantee in respect of any loans given to the lessee company or for any advance granted to the lessee company. 8. In Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association, Madras, AIR 1992 SC 1439, the Apex Court was dealing with the question whether leasehold right of sick company in the premises leased out to it is a property of the sick company and whether section 22(1) was attra....
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....t be the intention of Parliament in enacting the said provision to aggravate the financial certificates of a sick industrial company while the said matters were pending before the Board of the appellate authority by enabling sick industrial company to continue to incur further liabilities during this period. This would be the consequence if sub-section (1) of section 22 is construed to bring about suspension of proceedings for eviction instituted by landlord against a sick industrial company which has ceased to enjoy the protection of the relevant rent law on account of default in payment of rent. It would also mean that the landlord of such a company must continue to suffer a loss by permitting the tenant (sick industrial company) to occupy the premises even though it is not in a position to pay the rent. Such an intention cannot be imputed to the Parliament we are, therefore, of the view that section 22(1) does not cover a proceeding instituted by a landlord of sick industrial company for the eviction of the company premises let out to it. 9. The Apex Court thus held that the occupation of the premises by the sick industrial company as statutory tenant cannot be regarded as prop....
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.... Ltd. (supra ), this court held as follows:- "Learned counsel for the applicant further stated that the first defendant was declared a sick industrial company and at the time of filing the suit, the applicant had not secured the consent of the BIFR as required under section 22 of the Sick Industrial Companies (Special Provisions) Act. The applicant already filed Application No. 1563 of 1998 for appointment of an advocate-commissioner to repossess the leased assets and only notice was ordered. The first defendant filed the counter objecting to the same that it being a sick industrial company, the applicant is not entitled to repossess the same. Now, the BIFR by its order dated 29-2-2000, granted permission to the applicant to initiate and continue the legal proceedings subject to the condition that any decree passed in the suit would not be executed without the consent of the BIFR. It also permitted the applicant to repossess the equipment that had been leased to the first defendant. Now, the permission has been obtained from BIFR. Apart from that, section 22 of the Sick Industrial Companies (Special Provisions) Act will not be a bar to prevent the applicant from repossessing the m....
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.... and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined. The provision regarding suspension of legal proceedings contained in section 22(1) seeks to advance the object of the Act by ensuring that a proceeding having an effect on the working or the finances of a sick industrial company shall not be instituted or continued during the period the matter is under consideration before the Board or the appellate authority or a sanctioned scheme is under implementation without the consent of the Board or the appellate authority. It could not be the intention of Parliament in enacting the said provision to aggravate the financial difficulties of a sick industrial company while the said matters were pending before the Board of the appellate authority by enabling a sick industrial company to continue to incur further liabilities during this period. This would be the consequence if sub-section (1) of section 22 is construed to bring about suspension of proceedings for eviction instituted by landlord against a sick industrial company which has ceased to enjoy the protection of the relevant rent law on account of def....