Citation Codes

Equivalent Citations

citation codes

Case Number

F.A.F.O No. 673 of 1987*

Judges

A. Banerji, C.J
R.P Singh, J.

Acts

provisions of U.P Moneys Recovery Act as the Sick Industrial Company Act, 1985 is a Central Act and hence the provisions of the Central Act will supersede the provisions of the U.P Moneys (Recovery of Dues) Act, 1972.
sub-section (4) of this section or in Section 183 of the U.P Land Revenue Act, 1901 or Section 287-A of the Uttar Pradesh Zamindari Abolition and Land Reforms. Act, 1950
provisions of sub-section (5) of Section 3 of the Public Moneys (Recovery of Dues) Act, 1972 (hereinafter referred) to as the Recovery Act
Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the Act)
Article 254 of the Constitution since the provisions of Recovery Act
sub-section (5) of Section 3 of the Public Moneys Recovery Act
ARTICLE 254 CONSTITUTION OF INDIA
Sub-section (5) of Section 3 of the Recoveries Act, 1972
Section 26 of the Sick Industrial Companies Act, 1985
sub-section (5) of Section 3 of U.P Act 23 of 1972
provisions of Public Moneys (Recovery of Dues) Act.
provisions of the Sick Industrial Companies Act
sub-section (5) of Section 3 of the Recovery Act
Authority.11. Sub-section (3) of Section 22
Section, 16, 17 or 25 of 1985 Act
U.P Public Moneys Recovery Act
Industrial Companies Act, 1985
COMPANIES ACT 1956
sub-section (4) of Section 22
ARBITRATION ACT 1940
U.P Act 23 of 1972
Dues) Act, 1972

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Smart Summary

Judgment Summary — R.P. Singh, J. (First Appeal)

Factual and Procedural Background

This is the plaintiff's first appeal against the judgment and order dated 22 August 1987 of the District Judge, Tehri Garhwal, which dismissed the plaintiff's applications for interim injunction and vacated an earlier interim injunction granted on 24 February 1987.

The plaintiff (a company) filed Civil Suit No. 21 of 1987 seeking a permanent injunction restraining the defendant (PICUP) from recovering Rs. 70,64,360.67. The facts as set out in the plaint (and not disputed for present purposes) are:

Plaintiff obtained a loan of Rs. 31.86 lakhs from the defendant to establish a filament factory at Tapovan, Tehri Garhwal, and mortgaged building, machines and plant as security.
Plaintiff alleged a promised State subsidy was not released, causing inability to procure raw material and resulting losses.
Defendant issued a recovery certificate to the Collector for Rs. 70,64,360.67 (with interest) and was proceeding to recover the amount as arrears of land revenue.
Plaintiff sought an ad interim injunction to stay the recovery proceedings and prayed for removal of locks/guards and restoration of attached properties.
After the suit was instituted, the plaintiff-company was declared a "sick industrial company" under the Sick Industrial Companies (Special Provisions) Act, 1985 (the "Act"), and the company made a reference to the Board under Section 15 of that Act.

The District Judge held that (a) sub-section (5) of Section 3 of the Public Moneys (Recovery of Dues) Act, 1972 (the "Recovery Act") barred calling in question any recovery certificate or granting injunctions in respect of actions under that Act, and (b) Section 26 (and Section 22 was also relied on) of the Sick Industrial Companies Act, 1985 also barred injunctions in respect of actions under that Act. The District Judge therefore rejected the injunction applications. The plaintiff appealed.

Legal Issues Presented

Whether sub-section (5) of Section 3 of the Public Moneys (Recovery of Dues) Act, 1972 creates an absolute bar to calling in question a recovery certificate and to granting an injunction against actions taken in pursuance of that Act.
Whether, once the plaintiff-company was declared a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), Section 22 of that Act suspends proceedings for execution, distress or the like against the company's property and thereby prevents the defendant from proceeding with recovery under the Recovery Act.
Whether the provisions of the central SICA (and in particular Section 22) will prevail over and render void any repugnant provisions of the U.P. Public Moneys (Recovery of Dues) Act, 1972 under Article 254 of the Constitution.
Whether, given the above statutory scheme, the plaintiff is entitled to interim relief (restoration of possession, removal of locks/guards) during the pendency of SICA proceedings or thereafter when recovery under the Recovery Act is invoked.

Arguments of the Parties

Appellant's Arguments

The plaintiff-company had been declared a sick industrial company under the 1985 Act, and Section 22 of that Act bars execution, distress or similar proceedings against the company's property except with the consent of the Board—therefore the defendant cannot proceed to recover the loan under the Recovery Act while the declaration continues.
Under Article 254 of the Constitution, where a central law (SICA) is repugnant to a State law (U.P. Recovery Act) with respect to concurrent subject-matter, the central law prevails and the State law is void to the extent of repugnancy; therefore recovery under the U.P. Recovery Act cannot proceed.
The proceedings for recovery under the Recovery Act are illegal in the present circumstances.

Respondent's Arguments

The respondent relied on sub-section (5) of Section 3 of the Recovery Act to contend that a recovery certificate sent to the Collector is final, cannot be questioned in any suit or application, and no injunction shall be granted by any court or authority in respect of any action taken in pursuance of the Recovery Act.
The respondent accepted that while the company is declared a sick industrial company, proceedings under the Recovery Act "shall not proceed" (i.e., are stayed) by virtue of Section 22(1) of SICA, but argued that the property attached remains under the direct control of the Board and no injunction or release from attachment can be granted by a civil court without the consent of the Board; thus the plaintiff cannot obtain restoration of possession during the pendency of SICA proceedings.
The respondent also asserted that, as a matter of fact, the recovery certificate had been validly issued by the Collector and the Tehsildar (Nayab Tehsildar) was executing it — disputing the appellant's contention that the certificate was issued by a Kuri Amin rather than the Collector.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court proceeded by examining the competing statutory provisions and their effects on the plaintiff's suit for injunction. The analysis followed these sequential steps as reflected in the opinion:

The court first set out sub-section (5) of Section 3 of the Public Moneys (Recovery of Dues) Act, 1972 and observed that it provides that every certificate sent to the Collector shall be final, shall not be called in question in any original suit or application, and no injunction shall be granted in respect of actions taken pursuant to that Act. The court described this provision as creating "an absolute bar" against the grant of any injunction by any court or authority in respect of any action taken under the Recovery Act.
The court then considered the effect of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). It noted that the plaintiff-company had made a reference to the Board under Section 15 (procedural background) and that Section 22 of SICA provides that where certain inquiries or scheme processes are pending (including an inquiry under section 116, scheme consideration under section 17, implementation of a sanctioned scheme or appeal under section 25), then "no proceedings for execution, distress or the like" against the company's properties shall proceed further except with the consent of the Board or Appellate Authority.
The court accepted the appellant's submission that Section 22 imposes a clear suspension (stay) of execution/distress proceedings against the property of a declared sick industrial company while the declaration and SICA proceedings continue. The court observed that this (i) prevents the defendant from proceeding with recovery during the continuance of the declaration, but (ii) also means that the property's control is with the Board and the plaintiff cannot, during that period, obtain release from attachment or restoration of the property without the Board's consent.
Applying Article 254 arguments, the court recorded the appellant's contention that the central SICA should prevail over the U.P. Recovery Act where repugnancy exists; the court accepted that S. 22 clearly suspends recovery proceedings, and the respondent conceded not to pursue recovery during the continuance of the declaration. However, the court emphasized that suspension works both ways: while recovery proceedings cannot proceed, the plaintiff also cannot obtain interim relief for restoration of attached property because of the Board's control.
The court reconciled the two statutes by holding that during the period SICA's declaration remains in force, recovery proceedings cannot proceed but neither can the plaintiff press for release/restoration before the Board's consent; after the SICA proceedings conclude and the declaration ceases, the recovery proceedings under the Recovery Act may be resumed from the stage they were stayed, and then subsection (5) of Section 3 of the Recovery Act will operate to bar any injunction in respect of actions taken under that Act.
The court also dealt briefly with the appellant's factual contention about the person who issued the recovery certificate (Kuri Amin v. Collector). The District Judge had found, and the appellate court accepted, that the recovery certificate was issued by the Collector and that the Nayab Tehsildar was merely executing it; the appellate court found no merit in the appellant's submission on that point.
On this basis the court concluded that the appellant was not entitled to interim relief either during the continuance of the SICA declaration or thereafter (once recovery under the Recovery Act resumed), and that the District Judge had correctly rejected the injunction applications.

Holding and Implications

APPEAL DISMISSED

Direct holdings and immediate consequences:

The appeal is dismissed and the District Judge's order rejecting the plaintiff's interim injunction applications and vacating the earlier interim injunction is affirmed.
While the plaintiff-company's declaration as a sick industrial company remains in force under SICA, proceedings for execution, distress or the like against its properties cannot proceed except with the consent of the Board; accordingly, the defendant will not proceed with recovery during the continuance of that declaration (as conceded), but the plaintiff cannot obtain release of attachments or restoration of possession without the Board's consent.
After the SICA proceedings conclude and the declaration ceases, the recovery proceedings under the Public Moneys (Recovery of Dues) Act, 1972 may be resumed from the stage they were stayed; at that stage sub-section (5) of Section 3 of the Recovery Act will preclude courts or authorities from granting injunctions in respect of actions taken under that Act.
The court found no merit in the appellant's contention regarding the identity of the issuing authority for the recovery certificate and accepted the District Judge's finding that the Collector issued it and the Nayab Tehsildar executed it.
There will be no order as to costs in the circumstances of the case (as recorded by the court).

The opinion does not cite any judicial precedents and frames its decision on the basis of statutory interpretation of the Recovery Act and the Sick Industrial Companies Act, 1985, and the interplay between them (including the constitutional principle in Article 254 as argued by the appellant).

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M/S. Comet Filaments (India) Ltd. Dehradun v. The Pradeshya Industrial And Investment Corporation Of U.P Ltd. Lucknow .

R.P Singh, J.:— This is plaintiff's First Appeal from Order against the judgment and order dated 22nd August, 1987, passed by the District Judge, Tehri Garhwal dismissing the applications for interim injunction and vacating the interim injunction passed on 24-2-87.

2. The brief facts of the case are that the plaintiff-appellant filed a Suit No. 21 of 1987 in the court of District Judge, Tehri for a permanent injunction restraining the defendant-respondents from recovering Rs. 70,64,360.67 with the allegations that with a view to establish a Filament factory at Tapovan in the district of Tehri Garhwal, the plaintiff-company was granted a loan by the defendant for a sum of Rs. 31.86 lacs. The building, machines, tools and plants were mortgaged by the plaintiff as security for the loan. The plaintiffs case further was that, since subsidy that was promised by the State to the plaintiff was not released, the plaintiff could not procure the raw material and suffered huge loss. It was alleged that the defendant issued recovery certificate to the Collector, Tehri for a sum of Rs. 70,64,360.67 with interest and is proceeding to recover the sameas arrears of land revenue which is illegal and void and consequently the plaintiff filed an application praying for an ad interim injunction staying the recovery proceedings till the subsidy was released to the plaintiff. The plaintiff's case further is that after the coming into force of Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the Act) the plaintiff-company had been declared a sick industrial company on 13-8-1987 and hence in view of S. 22 of the Act no proceedings for execution, distress or the like against the properties of the plaintiff-company shall proceed further and hence also the recovery proceedings could not proceed against the plaintiff-company. The defendant contested the suit and the application for the ad interim injunction filed by the plaintiff on the ground that the suit for injunction and the injunction application is barred by the provisions of Public Moneys (Recovery of Dues) Act. The case of the defendant is that in view of the provisions of sub-section (5) of Section 3 of the Public Moneys (Recovery of Dues) Act, 1972 (hereinafter referred) to as the Recovery Act and recovery certificate sent to the Collector cannot be called in question in any suit and no injunction can be granted by any court or authority in respect of any action taken in pursuance of the recovery proceedings under the Recovery Act and hence there is a complete bar from granting any injunction in respect of any action taken in the present recovery proceedings. The case of the defendant further is that even after the plaintiffs company had been declared to be a sick industrial company, all proceedings relating to the obligation and liability of the sick industrial unit pending before any court, tribunal or authority shall remain stayed and hence no suit for injunction would lie in the, civil court and the application for ad interim injunction also is not maintainable during the pendency of the proceedings under Section, 16, 17 or 25 of 1985 Act and hence also the defendant's case that the injunction application moved by the plaintiff is not maintainable.

3. The facts of the case are not in controversy that the plaintiff-company had been given a ban by the defendant PICUP and hence recovery proceedings were started by the defendant for the recovery of the loan along with interest thereon amounting to Rs. 70,64,360.67. The plaintiff, hence filed the present suit in which he filed applications for ad interim injunction restraining the defendant from proceeding with the recovery of the loan and the plaintiff prayed for the removal of the locks and guards from the plaintiffs factory and further prayed for restoration of the attached properties. The learned District Judge, however, holding that there was an absolute bar created by sub-section (5) of Section 3 of the Public Moneys Recovery Act for granting any injunction in respect of any action taken in the Recovery Act and consequently no injunction could be granted by any court or other authority in respect of any action taken in the Recoveries Act held that the validity of the recovery certificate could not be challenged in the civil court and no injunction could be granted by the Civil Court restraining the authorities under the Recovery Act from proceeding to recover the amount of loan. The learned District Judge further held that Section 26 of the Sick Industrial Companies Act, 1985 also created an absolute bar from granting any injunction by any court or authority in respect of any action taken under the Act and hence no injunction could be granted in favour of the plaintiff. With the result the injunction applications moved by the plaintiff were rejected by the learned District Judge. Feeling aggrieved the plaintiff has filed the present appeal before this Court.

4. Heard Sri Rajesh Tandon, learned counsel for the appellant and Sri Murlidhar, Senior Advocate, for the respondent.

5. The principal point urged by the learned counsel for the appellant is that the plaintiff-company was declared as sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the Act) and consequently, all proceedings, for execution, distress or the like against the plaintiff-company could not proceed except with the consent of the Board and hence the defendant was not entitled to proceed to recover the loan under the Recoveries Act. It was further contended that in view of Article 254 of the Constitution since the provisions of Recovery Act are repugnant to the provisions of the Sick Industrial Companies Act which is an Act made by the Parliament the law made by the Parliament shall prevail and the law made by the U.P Legislature, to the extent of repugnance would be void and hence, the recovery proceedings cannot proceed under the provisions of the Recovery Act. It was further contended that the proceedings of recovery under the Recovery Act are illegal.

6. The learned counsel for the respondent, on the other hand, contended that even after the plaintiff's company was declared as sick industrial company, during the pendency of the proceedings under the Act no proceedings could be continued for obtaining any injunction or release from the attachment of the properties of the plaintiff-company which shall remain suspended and stayed as the property of the company shall remain under the direct control of the Board and consequently, no proceedings in respect of such property could go on at the instance of the plaintiff except with the consent of the Board. Hence, the civil suit and the application for injunction filed by the plaintiff during the continuance of the declaration of the plaintiff-company as sick industrial company cannot proceed and are not maintainable. The learned counsel for the respondent further contended that he does not dispute that during the pendency of the declaration of the plaintiff-company as sick industrial company the proceedings under the U.P Public Moneys Recovery Act shall not proceed but at the same time the property which is attached shall remain under the direct control of the Board and no injunction shall be granted by any court or authority in respect of such property without the consent of the Board.

7. We shall first examine the validity of the civil suit and the maintainability of injunction application filed by the plaintiff for restoring the possession of the attached properties of the plaintiff-company after removal of the leeks and guards from the plaintiff's factory. Sub-section (5) of Section 3 of the Recoveries Act, 1972 reads as follows:—

“(5) Save as otherwise expressly provided in the proviso to sub-section (4) of this section or in Section 183 of the U.P Land Revenue Act, 1901 or Section 287-A of the Uttar Pradesh Zamindari Abolition and Land Reforms. Act, 1950 every certificate sent to the Collector under sub-section (1) shall be final and shall not be called in question in any original suit, application (including any application under the Arbitration Act, 1940) or in any reference to arbitration and no injunction shall be granted by any action taken or intended to be taken in pursuance of any power conferred by or under this Act.”

8. A perusal of sub-section (5) quoted above will show that a certificate sent to the Collector for proceeding to recover the amount stated therein as arrears of land revenue shall not be called in question in any suit and no injunction shall be granted by any court or other authority in respect of any action taken in pursuance of the recovery proceedings under the Act Hence, the contention of the learned counsel for the respondent that in view of sub-section (5) of section 3 of the Act the application filed for obtaining ad interim injunction by the plaintiff was not maintainable and hence the learned District Judge has rightly rejected the application for interim injunction moved by the appellant.

9. In our opinion, sub-section (5) of Section 3 of the Recovery Act creates an absolute bar against granting any injunction by any court or authority in respect of any action taken under the Recovery Act for recovery of the amount which shall be recovered as arrears of land revenue., However, the learned counsel for the appellant contended that during the pendency of the suit the plaintiff company has been declared to be a sick industrial company under the Act. The plaintiff company had submitted a reference to the Board under Section 15 of the Act Sea 15 reads as follows:—

“15. Reference to Board.—(1) Where an industrial company has become a sick industrial company, the Board of Directors of the company, shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company.”

10. The learned counsel for the appellant contended that in view of Section 22 of Act No. 1 of 1986 all proceedings for execution, distress or the like against the property of the industrial company shall not proceed further except with the consent of the Board Hence, the proceedings for execution or distress against the property of the plaintiff industrial company initiated by the defendant are liable to be stayed Section 22 of the Act reads as follows:—

“22. Suspension of legal proceedings, contracts, etc.—(1) Where in respect of an industrial company, an inquiry under section 116 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 Companies Act, 1956 (1 of 1956) or any 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 shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.”

11. Sub-section (3) of Section 22 further provides that during the period of consideration of, any scheme under section 18 for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements to which such sick industrial company is a party immediately before the date of such order, shall remain suspended. The learned counsel for the appellant also invited our attention to sub-section (4) of Section 22 which also provides for stay of all proceedings relating to the sick industrial company pending before any court, tribunal or officer or authority and hence contended that no proceedings for recovery of the said amount due against; the plaintiffs company can proceed during the continuance of the declaration of the plaintiff company as sick industrial company. We see considerable force in this submission made by learned counsel for the appellant and in view of the clear provisions of Sec. 22, of the Act it is clear that no proceedings for the recovery of the amount of lone can proceed against the plaintiff's company, during the continuance of the declaration the Plaintiff Company.

12. Learned counsel for the appellant next contended that the proceedings for recovery of the loan cannot proceed under the provisions of U.P Moneys Recovery Act as the Sick Industrial Company Act, 1985 is a Central Act and hence the provisions of the Central Act will supersede the provisions of the U.P Moneys (Recovery of Dues) Act, 1972. Learned counsel for the appellant relied on the provisions of Article 254 of the Constitution of India in support of his submission which reads as follows:—

“254.(1) If any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament which Parliament is competent to enact or to any provision of an existing law with respect to one of the matters enumerated in the Concurrent List then subject to the provisions of clause (2), the law made by Parliament whether passed before or after the law made by the Legislature of such State, or, as the case may be the existing law, shall prevail and the law made by the Legislature of the State shall to the extent of the repugnancy, be void.”

13. In view of this provision, the learned counsel for the appellant contended that no proceedings for recovery of the loan under the Public Moneys (Recovery of Dues) Act, 1972 could proceed. Learned counsel for the respondent in reply submitted that he does not dispute the legal position of bar to the continuance of the proceedings for recovery till the declaration about the plaintiff company, as sick unit continues and the Respondent is not going to pursue the recovery proceedings in fact of the Statutory mandate of Section 22(1) of the Act which are clear and unambiguous but contended that the said provision only grants prospective stay and hence the appellant cannot claim release of property from attachment or restoration of the property. In our opinion, in view of the clear provisions of S. 22 of the Act further proceedings of recovery cannot proceed but at the same time during the pendency of the proceedings under the Act no proceedings can be started or carried on by the plaintiff for the release from the attachment or for the restoration of the property as the property of the plaintiff company will remain under the direct control of the Board and no proceeding in respect of the property in dispute under attachment can be proceeded with except with the consent of the Board. In fact during the continuance of these proceedings under the Act the plaintiff's suit for injunction will, remain suspended and hence no application for an interim injunction is maintainable at the instance of the appellant during the continuance of the proceedings under the Act in respect of the plaintiff company. Hence, in either case the plaintiff is not entitled to get any relief or obtain any interim injunction during the pendency of the proceedings under the Act. In this view of the matter the appellant is not entitled to any relief during the continuance of the said proceedings and the appeal fails on this ground alone.

14. Sub-section (4) of S. 22 of the Act provides that after the declaration of the plaintiff company as sick unit ceased, any proceedings so remaining stayed shall be proceeded with subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings were stayed. Hence, after the proceedings under the Act are over and the declaration ceases to be in force regarding the plaintiff company, the proceedings for recovery of the loan under the Public Moneys (Recovery of Dues) Act shall proceed. Further, in view of sub-section (5) of Section 3 of U.P Act 23 of 1972 no injunction shall be granted by any court or authority in respect, of any action taken in pursuance of this Act for recovery of the sum due. Hence, so long as the proceedings under the Sick Industrial Companies Act, 1985 continue in respect of the plaintiff company, the plaintiff would not be entitled to proceed with a suit for injunction or claim any relief for an interim injunction in respect of the properties so attached and after the proceedings under the Act come to an end, the recovery proceedings under U.P Act 23 of 1972 can proceed and then also there is a complete bar for any court or authority from issuing any injunction in respect of any action taken under the Act for the recovery of any sum due. Hence in any view of the matter the plaintiff is not entitled to any relief.

15. The learned counsel for the appellant also contended that recovery certificate had been issued by the Kuri Amin and not by the Collector. There are no merits in this submission of the learned counsel for the appellant. The learned District Judge has clearly found that the recovery certificate has been issued by the Collector and the Tehsildar is only executing the same and hence there is no illegality in the Nayab Tehsildar effecting attachment of the movable property in pursuance of the recovery certificate issued by the Collector. In the result, there are no merits in this appeal which is accordingly dismissed. In the circumstances of the case, however, there will be no order as to costs.

16. Appeal dismissed.

M/S. Comet Filaments... v. The Pradeshya Indust...