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TMI Blog2003 (5) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 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 receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority." 3. The decision in Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd. [1993] 78 Comp. Cas. 803 supports the contention that the present proceedings are not maintainable. It was observed by the Hon'ble Supreme Court as under : "...Section 22(1), shorn of the irrelevant part, provides that where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in any other law, no proceedings for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were the owner of the properties. If the corporation is permitted to resort to the provision of section 29 of the 1951 Act, while proceedings under sections 15 to 19 of the 1985 Act are pending it will render the entire process nugatory. In such a situation the law merely expects the corporation and for that matter any other creditor to obtain the consent of the BIFR or, as the case may be, the Appellate Authority to proceed against the industrial concern. The law has not left them without a remedy. We are, therefore, of the opinion that the word 'proceedings' in section 22(1) cannot be given a narrow or restricted meaning to limit the same to legal proceedings. Such a narrow meaning would run counter to the scheme of the law and frustrate the very object and purpose of section 22(1) of the 1985 Act. ****** ...The High Court was considerably influenced by the fact that the appellant company owed crores of rupees to banks and felt that so far as such creditors are concerned, different considerations may come into play but the High Court with respect failed to appreciate that the 1985 Act was enacted primarily to assist sick industrial undertakings which, inter alia, failed to meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the date of the sanctioned scheme legitimately belonging to the Revenue, cannot be and could not have been intended to be covered within section 22 of the Act." 5. The judgments in Shree Vallabh Glass Works Ltd.'s case (supra ) as well as Corromandal Pharmaceutical's case (supra) were reflected upon by the Apex Court in Tata Davy Ltd. v. State of Orissa [1997] 14 SCL 81 . The Bench favoured the earlier view in Shree Vallabh Glass Works Ltd.'s case (supra); significantly, Maharashtra Tubes Ltd.'s case (supra) was neither cited nor considered. The Hon'ble Court held that - "In the larger interest of the industrial health of the nation, section 22 of the Central Act requires all creditors seeking to recover their dues from sick industrial companies in respect of whom an inquiry under section 16 is pending or a scheme is under preparation or consideration or has been sanctioned, to obtain the consent of the Board to such recovery. If such consent is not secured and the recovery is deferred, the creditors' remedy is protected for the period of deferment and is, by reason of section 22(5), excluded in the computation of the period of limitation." It is because of the seemingly dive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iny and that from that time, action against the Company's assets must remain stayed as stated in section 22 till final decision is taken by the BIFR". This decision was affirmed by the Hon'ble Supreme Court in Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. [2000] 25 SCL 461 and it was clarified that section 22 would be attracted even after a winding-up order is passed. I have underlined the word 'assets' since it is my understanding that the Hon'ble Court intended to state that the action against the assets, in contradistinction to the omnibus and wider 'legal action', is what requires to be stayed. 8. In HIG Temp Chemicals (P.) Ltd. v. Satya Steel Strips (P.) Ltd. [1991] 72 Comp. Cas. 447 a learned Single Judge of the High Court of Andhra Pradesh found it futile to keep the winding-up petition pending where the Respondent-company was receiving the attention of the BIFR. He followed the view of the Division Bench in Arvindbhai N. Talati v. Testeels Ltd. AIR 1988 Guj. 213 where it was held that where winding-up proceedings had commenced they should be dismissed and need not be kept in abeyance. A learned Single Judge of the Rajasthan High Court in Tarun Shah v. Perfec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essures. The Hon'ble Supreme Court was fully mindful of and alive to this discomfort, but both in Real Value Appliances Ltd.'s case (supra) and Rishabh Agro Industries Ltd.'s case (supra) gave effect to and remained within the parameters of the principle that the plain meaning of the words employed in a statute must be adhered to. In any event, the creditors are not bereft of remedy. Even the unsecured creditor can provide information and material to the Board under section 16(1)(b), and may also initiate steps to obtain permission of the Board under section 18(3). As appeal has also been provided to the BIFR. When it is recalled that winding-up is essentially a discretionary relief, it leaves no scope but to direct all creditors in the direction of BIFR. 11. What section 22 states that "no proceeding for winding-up of the industrial company...shall lie or be proceeded with further...." The Court should eschew a tautological interpretation in favour of one which imparts a distinct meaning to the words employed by the Legislature. I would, therefore, draw a distinction between the word 'lie' on the one hand "be proceeded with" on the other. Parliament has taken pains not only to st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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