1997 (5) TMI 455 - HC - Companies Law

Summary

Issues Involved:
1. Applicability of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) to the suit filed by the plaintiff.
2. Whether the suit for recovery of arrears of rent and mesne profits falls under the category of proceedings that should be stayed under Section 22(1) of SICA.
3. Interpretation of the term "proceedings" under Section 22(1) of SICA.
4. Impact of the 1993 Amendment to SICA on the applicability of Section 22(1).
5. Relevance of prior judgments and their applicability to the current case.

Issue-wise Detailed Analysis:

1. Applicability of Section 22(1) of SICA to the suit filed by the plaintiff:
The petitioner contested the trial court's order rejecting the application under Section 22(1) of SICA for staying the suit. Section 22(1) of SICA provides for the suspension of legal proceedings against a sick industrial company during the pendency of an inquiry under Section 16 or a scheme under Section 17. The petitioner argued that the suit for recovery of possession and arrears of rent should be stayed under this provision.

2. Whether the suit for recovery of arrears of rent and mesne profits falls under the category of proceedings that should be stayed under Section 22(1) of SICA:
The court referred to the case of M/s Shree Chamundi Mopeds Ltd v. Church of South India Trust Association Madras, where it was held that eviction proceedings initiated by a landlord against a tenant company do not fall under the categories of proceedings automatically suspended under Section 22(1) of SICA. The categories include winding up, execution, distress, or the appointment of a receiver. The court concluded that eviction proceedings do not fall within these categories and thus are not liable to be stayed.

3. Interpretation of the term "proceedings" under Section 22(1) of SICA:
In the case of Maharashtra Tubes Ltd v. State Industrial and Investment Corpn. of Maharashtra Ltd, the Supreme Court held that the term "proceedings" in Section 22(1) should be given a broad interpretation to include coercive actions against the properties of the sick industrial company. However, the court in the current case found that eviction proceedings do not fall under the intended scope of "execution, distress or the like."

4. Impact of the 1993 Amendment to SICA on the applicability of Section 22(1):
The 1993 Amendment to SICA added the words "and no suit for recovery of money" to Section 22(1). The petitioner argued that this amendment clearly covers the suit for recovery of arrears of rent and mesne profits, making it liable to be stayed. The court acknowledged this argument and noted that a suit for recovery of arrears of rent and mesne profits would result in financial liability on the defendant, thus falling under the category of a suit for recovery of money.

5. Relevance of prior judgments and their applicability to the current case:
The court referred to the case of Deputy Commercial Tax Officer Vs. Corromandal Pharmaceuticals, where it was held that Section 22(1) should be read to apply only to dues included in the sanctioned scheme and not to liabilities incurred after the scheme's sanction. Applying this principle, the court concluded that mere pendency of an inquiry under Section 16 of SICA does not suffice for staying the suit; the dues must be included in the sanctioned scheme.

Conclusion:
The court allowed the revision in part. It maintained the trial court's order refusing to stay the suit for eviction but sent back the matter regarding the stay of the suit for recovery of money for fresh consideration. The parties were directed to appear before the trial court on 14th July 1997.