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2014 (1) TMI 1858

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..... his provision is relatable to section 104 of the C.P.C. Admittedly, the appellant is not a party to the suit. In the appeal filed, the appellant has basically assailed the injunction order on the ground of lack of jurisdiction, though other grounds are also taken - It is a settled proposition of law that the right of appeal is a creature of the statute and would be governed by the conditions of the statute. Being a vested right, it enables a party to the suit to prefer an appeal subject to fulfillment of the required conditions. However, there may be cases where a person, who may not be a party to the suit, but may feel the necessity to prefer an appeal, against an order passed in the suit. Such a person can also file an appeal provided he seeks leave of the court and the court grants the leave for the purpose. In the present case, it is seen that the appellant has not sought leave of the Appellate Court and, consequently, no leave to file appeal has been granted. Since the appellant is not yet a party to the civil suit, question of him raising the objection as to jurisdiction before the civil court also does not arise at this stage - this court is of the considered opinion that .....

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..... ed in W.P. (C) No. 4303 of 2013. Thereafter, as per order dated November 1, 2013, passed in W.P. (C) No. 6286 of 2013, the said case was tagged with W.P. (C) No. 4303 of 2013. The subject matter of all the three cases being interrelated, and as agreed to by learned counsel for all the parties, those were heard together and are being disposed of by this common judgment and order. F.A.O. No. 10 of 2013 has been filed by one Sri Ghanshyam Sarda against an order of injunction dated May 13, 2013, passed by the learned Civil Judge No. 3, Kamrup, Guwahati in Misc. (J) Case No. 254 of 2013, arising out of Title Suit (TS) No. 166 of 2013. By the aforesaid order of injunction, the Board for Industrial and Financial Reconstruction (BIFR) has been restrained from proceeding further with BIFR Case No. 149 of 1994. The suit has been filed by one M/s. Shiv Shankar Trading Co., an unsecured creditor of J.K. Jute Mills Co. Ltd. (company), which has been declared as a sick industrial company under the Sick Industrial Companies (Special Provisions) Act,. 1985, reference under which has been registered with the BIFR as BIFR Case No. 149 of 1994. 2. W.P. (C) No. 4303 of 2013 has been filed by the sa .....

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..... oceedings in BIFR Case No. 149 of 1994 which would pave the way for the plaintiff to institute appropriate legal proceeding against the company for realisation of dues. 7. The plaintiff then instituted T.S. No. 166 of 2013 at Guwahati seeking a declaration that the company is not a sick company within the meaning of the SICA, that the BIFR would cease to have jurisdiction over the company and that the plaintiff is entitled to a decree of ₹ 38,65,607 from the company with interest. Injunction was also sought to restrain the BIFR from proceeding further with BIFR Case No. 149 of 1994. The plaintiff also filed an injunction petition, which was registered as Misc. (J) Case No. 254 of 2013. 8. The learned Civil Judge No. 3, Kamrup, Guwahati passed injunction order dated May 13, 2013, restraining the BIFR from proceeding further with BIFR Case No. 149 of 19941 9. Against the aforesaid injunction order, Sri Ghanshyam Sarda has preferred an appeal before this court, which has been registered and numbered as F.A.O. No. 10 of 2013. This court by order dated June 14, 2013, admitted the appeal and without staying the injunction order, additionally issued certain further directio .....

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..... e might have been some interactions with the Sarda brothers. Expressing his reservation, he offered to recuse himself from hearing the matter. Notwithstanding the above, Sri Dua again participated in the proceedings on September 5, 2013, raising grave apprehension in the mind of the company, a key stakeholder in the proceedings before the BIFR, about the fairness of such proceeding. 14. Mr. K.N. Choudhury, learned senior counsel appearing for Sri Ghanshyam Sarda, the appellant in the appeal and the contesting respondent in the two writ petitions, has painstakingly taken the court to various stages of the proceedings before the BIFR. He contended that though the company was lying closed since the year 2003, following negotiations between the Singhania family, the erstwhile promoter of the company, and the Sarda group, there was change in the shareholding pattern of the company which was approved by the BIFR. Consequent thereupon, the company resumed its business activities. Though the management and control of the company was taken over by the Sarda brothers, dispute arose between them because of the activities of the elder brother, Sri Govind Sarda and his son, which led to a wh .....

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..... because of a petition filed by the plaintiff seeking amendment, entire suit has been kept in abeyance by the civil court. 18. Attacking the injunction order dated May 13, 2013, learned senior counsel submits that the civil suit itself is barred by section 22(1) and section 26 of the SICA. Consent sought by the plaintiff to institute civil suit was declined by the BIFR. Thus, in view of the express statutory bar, the civil court could not have entertained the suit and passed the injunction order. Therefore, the injunction order passed by the civil court is without jurisdiction, and such an order would be void being an order from a corum-non-judice. He also contends that as the registered office of the company is at Kanpur in the State of Uttar Pradesh and the BIFR is located at Delhi, Civil Court at Guwahati has no territorial jurisdiction either to entertain the suit. 19. Mr. Choudhury, further submits that the plaintiff had evidently sup-pressed about the Division Bench order of the Allahabad High Court, which was passed on May 1, 2013, before the civil court. He submits that it is evident that the suit filed is a result of collusion between the plaintiff and the company, a .....

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..... erments made in the plaint. From the pleadings in the plaint/it is evidently clear that a part of the cause of action, if not the whole, has arisen within the territorial limits of the Civil Court at Guwahati. Therefore, the Civil Court at Guwahati would have the territorial jurisdiction to decide the suit. He further submits that considering the relief sought for by the plaintiff, the alternative remedy provided under section 25 of the SICA is neither adequate nor effective. Exhaustion of alternative remedy is a matter of public policy, convenience and discretion and is not an inflexible rule. In the present case, the subject matter of the suit takes itself out of the ambit and scope of the provisions of section 25 of the SICA. For the said reason, the bar under sections 22 and 26 of the SICA would also not be attracted. In such circumstances, grant or refusal to grant permission by the BIFR to file civil suit would not be decisive while determining maintainability. Order and direction of the Allahabad High Court cannot take away the civil and legal rights of the plaintiff/petitioner to seek relief from the civil court. In any case, the petitioner was not a party to the proceeding .....

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..... and as such he wants continuation of the proceedings before the BIFR. 23. He further submits that in the suit filed at Guwahati, the learned civil judge while passing the injunction order recorded the fact that the company s net worth has become positive and, therefore, it is not entitled to plead the defence of section 22 of the SICA. Sri Ghanshyam Sarda has challenged this order in appeal before this court. But this court did not stay the injunction order, rather issued certain additional restrictive directions. 24. Continuing his submissions, Mr. Dutta submits that showing deference to the injunction order passed by the Civil Court at Guwahati, the company refrained from participating in the proceedings before the BIFR but the BIFR by disregarding the injunction order of the civil court is proceeding with the matter. The two members comprising the Bench of the BIFR hearing the case of the company, Sri J.P. Dua and Sri S.C. Sinha were former bankers of Oriental Bank of Commerce. They were close associates of Sri Ghanshyam Sarda. When this was pointed out before the BIFR by lawyers of the company, Sri J.P. Dua in the order dated January 31, 2013, recused himself from hearing .....

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..... as the civil court being a court of plenary jurisdiction can decide its own jurisdiction. He submits that the whole effort of Sri Ghanshyam Sarda is to misuse the forum of the BIFR and get the DRS which is favourable to him finalised and binding on the company. He further submits that time has come to terminate the proceedings before the BIFR as despite the case being pending before the BIFR for almost two decades, no effective decision could be taken by the BIFR while preventing the creditors, both secured and unsecured, from realising their dues. 26. Mr. I. Choudhury, learned counsel appearing for J.K. Jute Mills Mazdoor Ekta Union, respondent No. 4 in W.P. (C) No. 4303 of 2013, has supported the stand taken by Mr. K.N. Choudhury, learned senior counsel appearing on behalf of the appellant, Sri Ghanshyam Sarda. He submits that the Union is primarily concerned with the payment of outstanding dues of the workers by the management of the company, which would be more than 65 crores and has remained unpaid for several years now. The Union has got itself impleaded in the proceedings before the BIER and has been pursuing the matter so that the sick industrial company can be revived, .....

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..... ency of proceeding before the BIER. Sick industrial company is defined in section 3(1)(o) of the SICA. It means an industrial company registered for not less than five years which has, at the end of any financial year, accumulated losses equal to or exceeding its net worth. While section 4 provides for establishment of the BIFR, section 5 provides for constitution of the AAIFR. Section 15 of the SICA lays down the procedure for making a reference to the BIFR for determination of the measures to be adopted with respect to the sick industrial company. The BIFR then makes an inquiry into the working of such company under section 16. Following completion of enquiry under section 16, the BIER is empowered to make suitable order or to take decision to enable the company to make its net worth exceed the accumulated losses within a reasonable period. If the BIFR finds that it is not practicable for a sick industrial company to make its net worth exceed the accumulated losses within a reasonable time, it may direct any operating agency (OA) to prepare a scheme to provide for the various measures as laid down in section 18, which includes financial reconstruction, change of management, ama .....

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..... an order passed by the AAIFR holding that the industrial company in question, was no more a sick industrial company under section 3(1)(o) of the SICA. In that case, the AAIFR referred to and relied upon a judgment of the Madras High Court in W.P. (C) No. 2442 of 2006, wherein it was held that the company in question had ceased to be a sick industrial company. The Madras High Court had examined the audited balance-sheet of the said company as on March 31, 2007 and found that the audited balance-sheet was showing positive net worth. The company had moved an application before the BIFR praying for deregistration of the case on the ground that it was no longer a sick industrial company, but no decision was taken by the BIFR. It was held by the Madras High Court that with the net worth of the company turning positive, the company had ceased to be a sick company and, therefore, the BIFR could not have retained its jurisdiction over the company any further. The Madras High Court had examined in detail the balance-sheet of the company and declared that its net worth had become positive as it had wiped out the entire accumulated losses, which was certified by the statutory auditors. It was .....

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..... 19, the apex court was considering interpretation/application of the provisions of the SICA vis-a-vis the Companies Act, 1956. The apex court held that the SICA is a special statute and, thus, overrides other Acts, like Companies Act, 1956. Section 26 of the SICA bars jurisdiction of civil courts in respect of any matter for which the AAIFR or the BIFR is empowered. Even the jurisdiction of the High Court would be limited and all issues pertaining to preparation of scheme by the OA for revival and rehabilitation of the sick industrial company is within the domain of the BIFR. 34. This view was reiterated in the subsequent case of Managing Director, Bhoruka Textiles Ltd. v. Kashmiri Rice Industries reported in [2009] 150 Comp Cas 518 (SC) : [2009] 7 SCC 521. That was a case where the High Court had upheld the judgment and decree of a civil court, whereby it was held that section 22 of the SICA would have no application to the claim of the plaintiff for recovery of dues from the company. It was held that a suit would be barred when an inquiry under section 16 is pending. It was further held that, if the civil court s jurisdiction is ousted in terms of the provisions of section 22, .....

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..... n of its own jurisdiction, although, as a result of its enquiry, it may turn out that it has no jurisdiction over the suit. 39. Prakash Narain Sharma v. Burmah Shell Co-operative Housing Society Ltd. reported in AIR 2002 SC 3062, is a case where the hon ble apex court held that even where exclusion of jurisdiction of the civil court is statutorily provided still on availability of requisite grounds the civil court can entertain a civil suit on the well defined parameters settled by the Constitution Bench of the apex court in Dhulabhai v. State of Madhya Pradesh reported in [1968] 68 ITR (Sh. N) 25 (SC) : [1968] 22 STC 416 (SC) : AIR 1969 SC 78. In that case, the hon ble apex court held that it could not subscribe to the view that the Registrar of Co-operative Societies could have ignored the order of the civil court as not binding on him in view of certain provisions contained in the Co-operative Societies Act. The hon ble Supreme Court cautioned that it would be a dangerous proposition to be laid down as one of law that any individual or authority can ignore the order of the civil court by assuming authority upon itself to decide that the order of the civil court is one by coru .....

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..... e allowed by any Appellate Court or by any Revisional Court unless such objection is taken in the court of first instance at the earliest possible opportunity, and, in all cases where issues are settled at or before such settlement, and unless there has been consequent failure of justice. 44. Though section 9 of the C.P.C. provides that the civil court has jurisdiction to try all suits of a civil nature, excepting suits of which their cognisance is either expressly or impliedly barred, having regard to the discussions made above and since, this is a matter of jurisdiction, a decision in this regard would have to be taken by the civil court itself as to whether the suit filed by the plaintiff is maintainable or not. Without raising that issue before the civil court of the first instance, the appellant would be precluded from raising the issue of jurisdiction before the Appellate Court. 45. It is a settled proposition of law that the right of appeal is a creature of the statute and would be governed by the conditions of the statute. Being a vested right, it enables a party to the suit to prefer an appeal subject to fulfillment of the required conditions. However, there may be c .....

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..... he appellant is impleaded as a defendant in the suit, it would be open to him to file such application as may be provided under the law for discharging or variation or setting aside of the injunction order by the civil court which passed the said injunction order. If such an application is filed, the same shall be taken up and considered expeditiously in the light of the discussions made above. As counsel for the plaintiff has pointed out that plaintiff has filed a petition for amendment of the plaint, considering the above, such amendment petition filed by the plaintiff shall be kept in abeyance till decision is rendered by the civil court on Misc. (J) Case No. 341 of 2013 and thereafter, if any application is filed by the appellant for discharge or variation or setting aside of the injunction order as indicated above. W.P. (C) No. 4303 of 2013 51. As already noticed, the petitioner in this case, is the plaintiff in the civil suit. He seeks quashing of the proceedings before the BIER dated May 16, 2013 and the order of the BIER dated July 1, 2013, passed in BIFR Case No. 149 of 1994 on the ground that those have been passed in violation of the injunction order dated May .....

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..... er decision in the preceding part of this judgment. At present, there is no challenge to the said injunction order before any judicial forum. Therefore, as on date, the said injunction order is in operation. But notwithstanding the same, the BIFR considered the audited balance-sheet of the company as on December 31, 2012, in the proceedings on May 16, 2013 and by order dated July 1, 2013, directed the State Bank of India to appoint an independent auditor to examine the net worth position of the company as on December 31, 2012 and thereafter to submit SIA report. In the process, BIFR observed that the injunction order was a nullity being passed by the civil court without jurisdiction. The civil court was described as corum-non-judice. It was further observed that the civil court overreached the order of the Allahabad High Court and that the BIFR would follow the Allahabad High Court being the superior forum. As already explained by the apex court in Prakash Narain Sharma v. Burmah Shell Co-operative Housing Society Ltd., AIR 2002 SC 3062, the BIFR being a quasi judicial body, could not have ignored the order of the civil court. The BIFR not being a judicial forum superior to the Civ .....

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..... egard to the discussions made above, on and from May 13, 2013, all proceedings before the BIFR in BIFR Case No. 149 of 1994 would stand stayed and those would be of no legal consequence. W.P. (C) No. 4303 of 2013 is disposed of accordingly. W.P. (C) No. 6286 of 2013 57. In the hearing of BIFR Case No. 149 of 1994 on January 31, 2013, it was pointed out by learned counsel for the company that the two brothers, Sri Aditya Sarda, presently in control of the management, and Sri Ghanshyam Sarda were having long association with one of the Members of the Bench, Sri J.P. Dua, since he was working with the Oriental Bank of Commerce. Acknowledging that there were some interactions between him and the Sarda brothers, Sri J.P. Dua offered to recuse himself from hearing the case as would be evident from the order dated January 31, 2013. Since January 31, 2013, Sri J.P. Dua did not participate in the proceedings of BIFR Case No. 149 of 1994 as a Member of the BIFR. But in the proceedings held on September 5, 2013, whereby the BIFR directed the parties to file their comments and submissions on the SIA report of the State Bank of India on the net worth of the company within two weeks, S .....

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