TMI Blog2001 (4) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... the expiry of the extended period till 2002, within which the petitioner has to comply with the export obligations with reference to which the indemnity-cum-surety bonds were furnished. 2. This court granted interim injunction on November 2, 1999, in W.M.P. No. 25667 of 1999 and it has been extended on November 19, 1999, until further orders. To vacate the interim orders, respondent Nos. 1 and 2 have moved W.M.P. No. 25067 of 2000. When the applications came up for orders, as it was represented that the arguments in the interim applications as well as the main writ petition are one and the same, the writ petition itself could be disposed of. In the light of the said representation, this court heard the writ petition itself and reserved orders. 3. Heard Mr. S. Parthasarathy, learned counsel appearing for Mr. Mohan Parasaran, for the petitioners and Mr. V.T. Gopalan, learned Additional Solicitor General, appearing for Mr. S. Udayakumar, Additional Central Government Standing Counsel, appearing for respondent Nos. 1, 2 and 5. 4. At the outset it is essential to set out a few facts which are not in controversy. The petitioner-company entered into a joint venture with the Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of appendix 10( c ) of the Current Hand Book of Procedure duly certified by the chartered accountant and bank. 6. After further steps, the guarantees were invoked. The third and fourth respondent-banks by their communication intimated the petitioner that the first respondent had invoked the guarantee as the writ petitioner had failed to discharge the export undertaken obligation before the stipulated period and that he had failed to achieve the requisite export earning in fully convertible currency and the first respondent had called the banks to deposit the bank guarantee amount within fifteen days. The banks in turn called upon the petitioner to make arrangements for remitting the amount to honour the commitment under the guarantee. Hence the present writ petition seeking the relief of mandamus . 7. The petitioner had also moved the first respondent while furnishing the statement containing details of a small portion of exports so far made towards the import licence issued in its favour and requested the first respondent to give them the benefit of extended period up to March 30, 2001. Concedingly, the petitioner had not accomplished the export obligation which it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e law relating to invocation of bank guarantees is well settled and there is no controversy with respect to the legal position. However the points that arise for consideration, admittedly had not been decided by the Apex Court in its earlier pronouncements. The relevant point to be examined would be, when proceedings are pending in respect of the petitioner-company before the BIFR under the SICA and other provisions, whether the guarantees could be invoked ? 12. Learned counsel for the petitioner referred to earlier pronouncements of the Apex Court wherein the scope of section 22 of the SICA had been considered by Their Lordships of the Supreme Court in respect of a loan transaction or arrears of tax, liability incurred under a contract and like, which undoubtedly fell within the ambit of section 22(3) or (4) of the Act. It is contended by counsel for the respondents that those cases are distinguishable on facts and the said pronouncements will have no application to the facts of the case. The following points arise for consideration : ( i )Whether by virtue of the public notification issued by the Government of India on April 6, 1999, in exercise of powers conferred under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up to March 31, 2002. 2. In respect of EPCG licences issued in pursuance of the following notifications, the licence holder shall be deemed to be eligible for extension of export obligation period up to March 31, 2001, provided the licence holder who has failed to complete his export obligation within the earlier stipulated time-limit, applies for extension of the export obligation period on submission of a bank guarantee, covering the customs duty in proportion to the unfulfilled export obligation together with 24 per cent simple interest thereon from the date of import up to September 30, 2001. 3. The request for extension shall be filed with the concerned licensing authority within a period of 60 days from the date of the public notice. The licensing authority which originally issued the licence shall be competent to grant extension in the export obligation period. 5. In such cases where the licence holder has not availed of the facility accorded under this public notice, adjudication proceeding shall be initiated on the expiry of 60 days from the date of this public notice." Except forwarding a letter dated July 3, 1999, concedingly, the petitioner had not complied with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , while Mr. S. Parthasarathy, learned counsel appearing for the petitioner contends that the said expression covers all kinds of guarantees which could be invoked or enforced without reference to the petitioner-company. 17. A reading of sub-section (1) of section 22 of the SICA, according to counsel for the petitioner, has to be given on all comprehensive or wider meaning so as to include all kind of guarantees or liabilities whatsoever as the liability in respect of a statutory liability or tax liability as already held to be included by various decisions of the Apex Court and therefore the bank guarantees which are sought to be invoked and enforced is suspended by virtue of section 22 of the SICA and hence the respondent cannot proceed. 18. The learned Additional Solicitor General, while relying upon the pronouncements of the Supreme Court, contended that there shall be no interdiction or stay or injunction by a court in respect of a bank guarantee which is enforceable on its terms and interdiction or injunction or restriction, if any, by a court of law is impermissible except in case of fraud or like. This proposition of law is not in dispute by counsel for the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90] 2 SCC 440 and Dy. CTO v. Corromandal Pharmaceuticals [1997] 89 Comp. Cas. 1 1 (SC). In Tata Davy Ltd. s case ( supra ) Their Lordships of the Apex Court held thus : "...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 constent of the said Board to such recovery. If such consent is not secured and the recovery is deferred, the creditor s remedy is protected for the period of deferment is, by reason of sub-section (5) of section 22, excluded in the computation of the period of limitation. The words any other law in section 22 cannot, therefore, be read in the manner suggested by learned counsel for the respondents. The Corromandal Pharmaceuticals [1997] 89 Comp. Cas. 1, 11 (SC) judgment dealt with a sick industrial company which was enabled to collect amounts like sales tax after the date of the sanctioned scheme. This court said, such amounts like sales tax, etc. which the sick industrial company is enabled to collect after the date of the sanctioned scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bombay High Court, the Apex Court held thus : "The words in the square brackets above were inserted into section 22 by Act 12 of 1994 and it is these words which are relevant for our purposes. As we read them, they provide that no suit, ( a )for the recovery of money, or ( b )for the enforcement, ( i )of any security against the industrial company, or ( ii )of any guarantee in respect of any loans or advance granted to the industrial company; shall lie or be proceeded with except with the consent of the Board or the appellate authority under the said Act. For our purposes, therefore, the relevant words are : no suit ... for the enforcement....of any guarantee in respect of any loans or advance granted to the industrial company shall lie without the consent of the Board or the appellate authority. The words are crystal clear. There is no ambiguity therein. It must, therefore, be held that no suit for the enforcement of a guarantee in respect of a loan or advance granted to the concerned industrial company will lie or can be proceeded with, without the sanction of the Board or the appellate authority under the said Act. It is not possible to read the relevant wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial year, make a reference to the Board for determination of the measures which shall be adopted with respect to the company." (p. 288) 24. In Patheja Bros. Forgings and Stamping s case ( supra ) as already pointed out the Apex Court emphasised that the Legislature intended to protect the personal interest of the guarantors as proceedings against guarantors and their personal properties would not affect the revival of the industrial company in any manner whatsoever. In the circumstances of the words "of any guarantee in respect of any loan or advance granted to the industrial company in the context will have to be read as a guarantee given by the industrial company towards loan or advance and none else". Section 22 is clear and unambiguous in that they provide that no suit for the enforcement of a guarantee in respect of any loan or advance granted to the concerned industrial company will lie or can be proceeded without the consent of the Board or the appellate authority. 25. The decision of the Special Court in Bhoruka Steel Ltd. v. Fairgrowth Financial Service Ltd. [1997] 89 Comp. Cas. 547 has been approved by the later Full Bench judgment in Solidaire India Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort policy and to avail of the concession of duty. But for the guarantee given by the bank, the duty-free import of capital goods would not have been permit- ted. It is the assurance of the bank which enabled the petitioner to avail of the duty-free import. 28. It is fundamental that the language of the statute has to be read as it is and no addition or subtraction of words is permissible. The object is to give protection to the industries which are unable to repay the loans or advance or liability of like nature. In terms of the provision of Import and Export Control Act, notifications have been issued and in terms of the said notification what has been undertaken by the petitioner is to discharge performance of the obligation as per the notification by availing of the benefit of the scheme and importing capital goods or machinery free of duty or at a concessional rate. The failure to re-export had led to the respondent enforcing the provisions of the scheme under which capital goods have been imported with the concomitant obligation to re-export before a particular date and the value to be exported being thrice the value of the capital goods imported under a licence. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept in jail the efforts of the BIFR for reconstruction/revival of the company will not be possible and in that event the very purpose of inquiry by the BIFR will be rendered futile. The contention is too remote and the apprehension far-fetched. We reject the said contention. In our considered view section 22 of the SICA does not create any legal impediment for instituting and proceeding with a criminal case on the allegations of an offence under section 138 of the negotiable Instruments Act against a company or its directors. The section as we read it only creates an embargo against disposal of assets of the company for recovery of its debts. The purpose of such an embargo is to preserve the assets of the company from being attached or sold for realisation of dues of the creditors. The section does not bar payment of money by the company or its directors to other persons for satisfaction of their legally enforceable dues." (p. 763) 31. In Gujarat Steel Tube Co. Ltd. v. Virchandbhai B. Shah [1999] 98 Comp. Cas. 716 1 , the Apex Court held that filing of eviction petition on the ground of non-payment of rent cannot be regarded as a suit filed for recovery in nature and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. The language of section 22 of the Act is certainly wide. But, in the totality of the circumstances, the safeguard is only against the impediment, that is likely to be caused in the implementation of the scheme. If that be so, only the liability or amounts covered by the scheme will be taken in, by section 22 of the Act. So, we are of the view that though the language of section 22 of the Act is of wide import regarding suspension of legal proceedings from the moment an inquiry is started, till after the implementation of the scheme or the disposal of an appeal under section 25 of the Act, it will be reasonable to hold that the bar or embargo envisaged in section 22(1) of the Act can apply only to such of those dues reckoned or included in the sanctioned scheme. Such amounts like sales tax, etc., which the sick industrial company is enabled to collect after 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. Any other construction will be unreasonable and unfair and will lead to a state of affairs enabling the sick industrial unit to collect amounts due to the Revenue and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the import licence to be exported and in the event of failure to achieve the same, contingency had been provided for, which is in terms of section 11 of the Act. Therefore it is for the violation of statutory notification which is penal in obligation, i.e., public delicts and it is to enforce the policy in terms of the said provision condition has been imposed. 34. Therefore it neither forms part, nor will it fall under the category of loan or advancement, nor is it an obligation falling under section 22 of the Act. The obligation with respect to which the bank guarantees were furnished is a distinct obligation which arises from injuries but obligations which are styled analogically obligations " quasi ex contractu ". It is in the nature of liability which is being enforced for violation of the policy or the import licence. Hence, section 22 of the SICA cannot be invoked and the petitioner is not entitled to any relief. Further, enforcement of guarantees furnished, which guarantees the bank is bound to honour as the petitioner s liability to the said obligation has neither ceased nor suspended, nor extinguished by operation of law. The bank has to honour its commitment and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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