TMI Blog1992 (4) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... etition cannot be held to have been passed in contravention of the provisions of section 22(1) of the Act. - 2553 OF 1991 - - - Dated:- 29-4-1992 - N.M. KASLIWAL, M.M. PUNCHHI AND S.C. AGRAWAL, JJ. C.N. Sree Kumar for the Appellant. K. Madhva Reddy, N.K. Gupta and N.D.B. Raju for the Respondent. JUDGMENT S.C. Agrawal, J. These appeals filed by Shree Chamundi Mopeds Ltd. raise questions involving the interpretation of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, hereinafter referred to as "the Act". The appellant is a public limited company registered under the Companies Act, 1956. It was set up with the object of manufacturing mopeds in collaboration with Cycle Peugot of France. It has set up a factory at Hirahalli in Tumkur District of Karnataka State. The appellant-company has taken on rent the premises belonging to the Church of South India Trust Association, respondent No. 1, in these appeals, in Bangalore on a monthly rent of Rs. 21,159. The appellant-company committed default in payment of rent and, as on March 31, 1987, a sum of Rs. 2,45,534 was payable as rent to the respondents. The respondents issued a le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val of the company to the ICICI urgently and the ICICI was directed to appraise the proposal, if any, submitted by the promoters to them and submit their report to us within one month. If no acceptable rehabilitation scheme is received by the BIFR within one month, our opinion to wind up the company will be forwarded to the High Court of Judicature in Karnataka for further necessary action under the law." The appeal filed by the appellant-company before the appellate authority for Industrial and Financial Reconstruction, hereinafter referred to as "the Appellate Authority", against the said order dated April 26, 1990, was dismissed by the Appellate Authority by order dated January 7, 1991. The appellant-company has filed Writ Petition (Civil) No. 594 of 1991 in the High Court of Delhi wherein the said order passed by the Appellate Authority has been challenged. In the said writ petition, the High Court of Delhi, on February 21, 1991, passed an order for issuing notice returnable by May 10, 1991, to show cause as to why rule nisi be not issued. On the stay petition filed with the said writ petition, notice was issued for May 10, 1991, and in the meanwhile, operation of the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Thereafter, the XII Additional Small Causes Judge, Bangalore, by order dated September 30, 1989, allowed the eviction petition filed by the respondents and held that the respondents were entitled to get possession of the premises and that the appellant-company is liable to vacate and give possession to the respondents. The appellant-company filed a writ petition against the said order of the Additional Small Causes Court which was subsequently converted into a revision petition under section 50 of the Karnataka Rent Control Act. The said revision was dismissed by a learned single judge of the Karnataka High Court by order dated 15th March, 1991, in view of section 29(1) of the Karnataka Rent Control Act which prescribes that no tenant against whom an application for eviction has been made by a landlord under section 21 shall be entitled to prefer or prosecute a revision petition under section 50 against an order made by the court on an application made under section 21 unless he has paid or pays to the landlord or deposits with the District Judge or the High Court, as the case may be, all arrears of rent due in respect of the premises up to the date of payment. The learned s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viction petition was dismissed by the learned single judge of the High Court on March 15, 1991, i.e., after the passing of the stay order by the Delhi High Court. The second question arises for consideration only in Civil Appeal No. 2553 of 1991 arising out of the eviction proceedings instituted by the respondents. Sub-section (1) of section 22, which alone has relevance to these questions, provides as under : "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 under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, 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 a receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by its order dated January 7, 1991. While considering the effect of an interim order staying the operation of the order under challenge, a distinction has to be made between the quashing of an order and stay of operation of an order. Quashing of an order results in the restoration of the position as on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. This means that, if an order passed by the Appellate Authority is quashed, and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the Appellate Authority would be restored and it can be said to be pending before the Appellate Authority after the quashing of the order of the Appellate Authority. The same cannot be said with regard to an order staying the operation of the order of the Appellate Authority because, in spite of the said order, the order of the Appellate Authority continues to exist in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndlord against the tenant who happens to be a sick company. In this regard, it may be mentioned that the following proceedings only are automatically suspended under section 22(1) of the Act : (1)proceedings for winding up of the sick industrial company ; (2)proceedings for execution, distress or the like against the properties of the sick industrial company ; and (3)proceedings for the appointment of a receiver. 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22(1) does not cover a proceeding instituted by a landlord against a sick industrial company for the eviction of the premises let out to it. We are also unable to agree with the contention of learned counsel for the appellant-company that the leasehold interest of the appellant-company in the premises leased out to it is property for the purpose of section 22(1). It is no doubt true that the leasehold interest of a lessee in the premises leased out to him is property which can be transferred and the said interest can also be attached and sold by way of execution in satisfaction of a decree against the lessee. In that sense, it can be said that the leasehold interest of a company is its property. But the question is whether the same is true in respect of the interest of a company which is in occupation of the premises as a statutory tenant by virtue of the protection conferred by the relevant rent law because, in the instant case, on the date of reference to the Board, the proceedings for eviction of the appellant-company were pending and the appellant-company was in occupation of the premises only as a statutory tenant governed by the provisions of the Karnataka Rent Control Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any tenant to sub-let the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein : Provided that the State Government may, by notification, permit in any area the transfer of interest in premises held under such leases or class of leases and to such extent as may be specified in the notification : Provided further that nothing in this section shall apply to a tenant having a right to enjoy any premises in perpetuity. (2)Any person who contravenes the provisions of sub-section (1), shall, on conviction, be punished with fine which may extend to one hundred rupees." From these provisions, it would appear that except in cases covered by the two provisos to sub-section (1) of section 23, there is a prohibition for a tenant to sub-let the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein. This prohibition is, however, subject to a contract to the contrary. A tenant who sublets or assigns or transfers the premises in contravention of this prohibition loses the protection of law and can be evicted by the landlord under section 21(1)( f ). In the case of a statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X
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