TMI Blog2010 (4) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant/defendant were dismissed and the suit filed under order XXXVIII of the Code of Civil Procedure, 1908 ('CPC for short) for the recovery of mesne profits for the sum of rupees 31,30,153 together with interest and costs was decreed. In the first application, IA No. 1171 of 2006, the appellant/defendant prayed for condonation of delay in entering appearance (that is filing the address form). In the second application, IA No. 1170 of 2006, the appellant/ defendant sought the rejection of the plaint under order VII, rule 11(d), of the CPC on the ground that it had been declared a sick industrial unit in terms of section 3(1)(o) of Sick Industrial Companies (Special Provisions) Act, 1985 ('SICA' for short). Before us, the only aspect that has been argued is that SICA places a complete prohibition on all judicial proceedings leaving no alternative to the trial judge other than ordering the rejection of the plaint. 2. It appears from a perusal of the records that summons in Form 4 under order XXXVII of the CPC were served on defendant No. 1 by affixation at Hosur, Karnataka, on 22.8.2005, and on defendant No. 2, on 30.8.2005, at Bangalore. The aforementioned applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant were pending in a manner such that the benefit of section 22 of SICA would enure to the appellant. Secondly, the appellant should have paid costs imposed upon it; it has, without demur, paid rupees 33,000 as court fee in this appeal. Thirdly, the appellant should have disclosed that at least the principal amount claimed by the plaintiff in the summary suit had been shown and disclosed in the scheme formulated and laid before the BIFR. Having failed to do so, we are in complete agreement with the learned Single Judge that the averments made in the plaint would, in the absence of a written statement, have to be presumed to be correct. The CPC now mandates that the written statement must be filed within thirty days and in exceptional circumstances not later than ninety days of service. The rigours of this provision are not circumvented by preferring an application under order VII, rule 11, of the CPC. We, therefore, conclude that the appeal, inasmuch as it challenges the impugned judgment, is bereft of merit. 5. We think it appropriate, however, to consider the provision of SICA and analyse what it endeavours to achieve. We must immediately take note of the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CA company, it would cause unjustified hardship. Whichever way we look at the matter, there can be no logic in denying legal recourse to a party for proving its debt. In the event that at least the principal amount or a substantial part of it stands admitted, either in the suit or by means of a mention in the scheme placed before the BIFR, the aggrieved party must be permitted to prove its claim. In holding so, the only prejudice that we can conceive of is incurring expenditure in legal fees. When this is weighed against the interests of a person claiming that the company is indebted to it, the balance tilts in favour of the latter. A holistic reading of section 22(1) of SICA makes it manifestly clear that Parliament's intention was to insulate sick companies only against proceedings for winding-up or for execution, or distress or the like or for enforcement of any security or guarantee. In the case in hand, despite several opportunities granted to the appellant, it has miserably and perhaps deliberately failed to substantiate that the claim mentioned in the suit has been reflected in the scheme placed before the BIFR but even more poignantly, that a scheme was, in fact, pending be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ick 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 withhold it indefinitely and unreasonably: Such a construction which is unfair, unreasonable and against spirit of the statute in a business sense should be avoided. The situation which has arisen in this case seems to be rather exceptional. The issue that has arisen in this appeal did not arise for consideration in the two cases decided by this court in Gram Panchayat v. Shree Vallabh Glass Works Ltd. [1992] 3 Comp LJ 346 (SC): [1990] 2 SCC 440 and Maharashtra Tubes Ltd. v State of Industrial and Investment Corporation of Maharashtra Ltd. [1994] 2 Comp , LJ 346 (SC): [1993] 2 SCC 144. It does not appear from the above two decisions of this court nor from the decisions of the various High Courts brought to our notice, that in any one of them, the liability of the sick company dealt with therein itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanctioned the so-called SICA bar was not attracted. A single bench of the Bombay High Court in Special Steels v. Jay Prestressed Products Ltd. [1991] 72 Comp Cas 277 (Bom) has opined that the pivotal question in connection with the current conundrum concerns the assets of the company and its functioning, and these would not be jeopardised if a civil suit continues. In Hardip Singh v. Income Tax Officer, Amritsar [1981] 3 Comp LJ 655 (SC): [1979] 118 ITR 57 (SC) the winding-up petition was allowed to continue and only when the third and final stage of the dissolution of the company came to be reached, was the moratorium of section 22 of the SICA enforced. 10. Finally, we must consider the relevance of NGEF Ltd. v. Chandra Developers (P) Ltd. [2005] 6 Comp LJ 203 (SC): [2005] 8 SCC 219, on which reliance has been placed by learned counsel for the appellant. In the backdrop of several judgments of the Supreme Court, it is inconceivable for a bench comprising two learned Judges to charter a fresh and diametrically different view of section 22 of SICA to previous pronouncements. A careful consideration of the judgment discloses that their Lordships had countenanced a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been made under the provisions of the 1996 Act, indisputably is being executed before a civil court. Execution of an award, beyond any cavil of doubt, would attract the provisions of section 22 of the 1985 Act. Whereas an adjudicatory process of making an award under the 1993 Act may not come within the purview of the 1985 Act but once an award made is sought to be executed, it shall come into play. Once the awarded amount has been included in the scheme approved by the board, in our opinion, section 22 of 1985 Act would apply. 19. If the liabilities of the appellant are covered by the scheme framed under section 22 of the 1985 Act, the High court was clearly in error in coming to the conclusion that the provisions thereof are not attracted only because the debt had been incurred after the company was declared to be a sick one." 12. It is in this analysis that we have reached the conclusion that the appeal calls for dismissal with costs, which we quantify at rupees 25,000 which are in addition to the sum of rupees 10,000 already imposed as costs by the learned Single Judge. The appeal is dismissed in these terms. Pending applications are also dismissed. EFA(OS) No, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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