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National Textile Corporationpetitioner v. Kamla Sharma.S
Structured Summary of the Opinion (Jaspal Singh, J.)
Factual and Procedural Background
The respondent, under whom the petitioner company was admittedly a tenant, instituted a suit seeking possession and recovery of mesne profits/damages. The petitioner company filed an application under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 ("the Act"), alleging that an inquiry under section 16 had been held and a scheme under section 17 was under preparation or consideration, and on that basis the suit was not maintainable. The learned Additional District Judge dismissed that application. The petitioner therefore moved this civil revision.
The petitioner's application under section 22 challenged the maintainability of the suit only to the extent it sought mesne profits and damages; it did not contest, in that application, the maintainability of the suit for possession. At the hearing before the revisional court the petitioner additionally argued that the suit for possession was also barred. The respondent's counsel indicated that, as to the claim for mesne profits/damages, the respondent-plaintiff would approach for the consent required under the Act and that she was pressing the suit only insofar as it related to possession.
Legal Issues Presented
- Whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 bars a suit for possession of premises leased to a company covered by the Act during the pendency of an inquiry under section 16, or while a scheme under section 17 is being prepared/considered or implemented, or while an appeal under section 25 is pending.
- Whether section 22 bars proceedings for mesne profits/damages (i.e., recovery of money for use and occupation) absent the consent of the Board or the Appellate Authority.
- Whether the term "proceedings" (and the phrase "coercive activity 'of the type' mentioned in section 22(1)") must be given a broad construction to include suits for possession or other coercive actions not expressly listed in section 22(1).
Arguments of the Parties
Petitioner (the company)
- The petitioner initially challenged only the portion of the suit seeking mesne profits/damages on the basis of section 22 of the Act, asserting that because an inquiry under section 16 had been held and a scheme under section 17 was under preparation/consideration, the suit (at least in respect of mesne profits/damages) was not maintainable.
- At the hearing before the revisional court the petitioner further argued (though this contention was not set out in its original application) that the suit for possession itself is a "coercive activity" barred by section 22 and therefore the suit for possession should not lie or be proceeded with.
- The petitioner relied on the Supreme Court judgment in Maharashtra Tubes Ltd. v. State Industrial & Investment Corporation of Maharashtra Ltd. & Anr. (1993) 2 SCC 144, submitting that the word "proceedings" in section 22(1) should be broadly construed so as not to be confined to the narrower meaning indicated by the marginal note, and that coercive activities of the type mentioned in section 22(1) should cease while inquiries/schemes/appeals under the Act are pending.
Respondent (the landlord/plaintiff in the suit)
- The respondent proceeded with the suit for possession and for recovery of mesne profits/damages. Before the revisional court the respondent's counsel stated that as to the mesne profits/damages claim the respondent-plaintiff would seek the consent required under the Act, and that the respondent was pressing the suit only insofar as it related to possession.
- The Additional District Judge had already dismissed the petitioner's application under section 22; that dismissal formed the immediate subject of the civil revision.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Maharashtra Tubes Ltd. v. State Industrial & Investment Corporation of Maharashtra Ltd. & Anr., (1993) 2 SCC 144 | Asserted principle: the word "proceedings" in section 22(1) should be given a broad construction so as to effect cessation of coercive activities "of the type" mentioned in section 22(1). | The court acknowledged that Maharashtra Tubes expanded the grip of section 22 to some extent, but held that the decision did not relate to a suit for possession and did not support the petitioner's contention that a suit for possession is a coercive activity of the type barred by section 22(1). |
| M/s Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association, Madras AIR 1992 SC 1439 | Held that eviction proceedings (suit for possession) against a sick company are not covered by category (2) of section 22 (i.e., deprivation of property by eviction does not bring such proceedings within section 22(1) as a barred coercive activity). | The court relied on this precedent as controlling: it held that in view of Shree Chamundi Mopeds a suit for possession of premises leased to a company covered by the Act cannot be treated as a coercive activity of the type mentioned in section 22(1). |
Court's Reasoning and Analysis
The court began by noting the limited scope of the petitioner's original application under section 22: it challenged the suit only insofar as it sought mesne profits/damages and did not challenge the suit for possession. The court observed that the petitioner later sought to expand its contention to include the suit for possession, but that this contention had been absent from the original application.
The parties' arguments turned on the construction and scope of section 22(1) of the Act. The petitioner relied on Maharashtra Tubes to urge a broad construction of "proceedings" so as to include coercive activities like eviction/suit for possession. The court examined the text of section 22(1) (which expressly bars, inter alia, proceedings for winding up, execution/distress, appointment of a receiver, suits for recovery of money or enforcement of security or guarantees, except with the consent of the Board/Appellate Authority) and considered the precedents cited.
Critical to the court's conclusion was the Supreme Court's earlier decision in M/s Shree Chamundi Mopeds Ltd. The court treated that decision as holding that leasehold rights and eviction proceedings do not fall within the category of property-deprivation proceedings contemplated by section 22(1). The revisional court accepted that Maharashtra Tubes did broaden the scope of the provision to some extent, but it observed that Maharashtra Tubes did not concern a suit for possession and, in any event, did not extend the provision so far as to include eviction proceedings.
The court further addressed the petitioner's reliance on a post-1992 amendment (Act 12 of 1994), which tightened the text of section 22 to spell out that "no suit for the recovery of money or for the enforcement of any security ... or of any guarantee ... shall lie or be proceeded with further, except with the consent of the Board, or, as the case may be the Appellate Authority." The court found that the amendment was limited to suits for recovery of money and enforcement of securities/guarantees, and did not purport to bring suits for possession within the ambit of the provision. Therefore the amendment did not assist the petitioner in arguing that s22 bars suits for possession.
On this basis — relying on the textual scope of section 22(1) and the authority of M/s Shree Chamundi Mopeds Ltd., and reading Maharashtra Tubes as not extending to suits for possession — the court concluded that a suit for possession of leased premises is not a "coercive activity of the type" mentioned in section 22(1) and thus is not barred by section 22.
Holding and Implications
Holding: The court held that section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 is not a bar to a suit for possession of premises leased to a company covered by the Act. The revision petition challenging the learned Additional District Judge's dismissal of the petitioner's application under section 22 was dismissed. The court made no order as to costs.
Implications:
- The direct legal consequence for the parties is that the suit for possession may proceed; the petitioner's invocation of section 22 does not prevent the landlord's suit for possession from being heard or continued.
- As to claims for mesne profits or damages (recovery of money/use and occupation), those claims fall within the scope of section 22 as amended and may require the consent of the Board or the Appellate Authority before proceeding — a position acknowledged in the opinion when the respondent's counsel said the respondent would approach for consent in respect of mesne profits/damages.
- The court did not purport to lay down a new principle of law beyond applying existing Supreme Court authorities; it treated M/s Shree Chamundi Mopeds Ltd. as controlling with respect to suits for possession and read Maharashtra Tubes as not extending section 22 to eviction proceedings. The opinion therefore confines its effect to the case at hand and does not announce a broader novel rule beyond the application of those precedents.
Disposition: Revision petition dismissed. No order as to costs.
Jaspal Singh, J. (Oral)— The respondent, under whom the petitioner company is admittedly a tenant, instituted a suit for possession and for recovery of mesne profits/damages etc. In response to the same the petitioner company moved an application under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter called the Act) alleging that since an enquiry had already been held under section 16 and a scheme was already under preparation or consideration within the meaning of section 17 of the said Act therefore, the suit was not maintainable. The learned Additional District Judge, however, did not agree. He dismissed the application. Hence this civil revision.
The perusal of the application under section 22 of the Act would go to show that the company had challenged the maintainability of the suit only so far as it related to the relief for mesne profits/damages etc. It did not say that the suit for possession too could not lie. I am mentioning this because now it has been argued before me that even the suit for possession would not lie. Thus a submission has been made which was conspicuous by its absence in the application. I may also mention by way of preliminaries that the learned counsel for the respondent has submitted that as far as the claim for mesne profit or damages for use and occupation is concerned, the respondent-plaintiff would approach for consent as required under the Act and that it may be taken that she is now pressing the suit only as far as it relates to the relief for possession.
With the preliminaries over it may be mentioned that the entire arguments revolved around a judgment of the Supreme Court in Maharashtra Tubes Ltd. v. State Industrial & Investment Corporation of Maharashtra Ltd. & Anr. (1993) 2 SCC 144. It was contended that in the light of the said judgment the word “proceedings” in section 22(1) has to be broadly construed so as not to confine it to “legal proceedings” as used in the marginal note with the provisions, and that where an enquiry is pending under section 16/17 of the Act or an appeal is pending under section 25 of the Act there should be cessation of the coercive activities of the type mentioned in Section 22(1). The learned counsel submitted that suit for possession was nothing but a coercive activity within the meaning of the said provision.
Is it so?
Before I venture to answer, let us have look at the provision. This is how section 22 of the Act runs:
“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 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, exempt with the consent of the Board or, as the case may be, the Appellate Authority.”
I feel the answer is provided by yet another judgment of the Supreme Court in M/s Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association, Madras AIR 1992 SC 1439 wherein it was held that the plea that the leasehold rights of a sick company in the premises leased out to it is property and since the eviction proceedings would result in the company being deprived for the said property, the said proceedings would be covered by category (2) of section 22 is not tenable. However, the learned counsel does not want me to follow the said dictum. He says that the later judgment in Maharashtra Tube Ltd. expands the grip of the provision. It does no doubt, but not to the extent as canvassed. What is equally significant is that the judgment in Maharashtra Tubes Ltd. did not relate to a suit for possession. In any case it merely states that there should be cessation of the coercive activity “of the type” mentioned in section 22(1) of the Act. In view of the Judgment in M/S Shree Chamundi Mopeds Ltd. (Supra) a suit for possession of the premises leased out to a company covered by the Act cannot be taken to be a coercive activity “of the type” mentioned in Section 22(1) of the Act.
The learned counsel submits, as a last resort, that the judgment in M/s Shree Chamundi Mopeds Ltd. (Supra) was before the amendment of Section 22 of the Act. He submits that amended section 22 relates not only to the legal proceedings but even to a suit and that under the circumstances the judgment delivered in the year 1992 by the Supreme Court loses its relevance. I still remain unpersuaded. True, there has been an amendment by act 12 of 1994 which says that “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. However, the suit being for possession and not for recovery of money or for enforcement of any security or any guarantee in respect of any loan or advance, I fail to see how this amendment comes to the rescue of the petitioner or how it washes away the effect of the judgment of the Supreme Court in M/s Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association (Supra). The amendment has a limited range and suit for possession is surely beyond its reach.
For the reason recorded above I hold that section 22 is no hurdle in the way of suit for possession. The revision petition thus stands dismissed. No order is made as to costs.
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