Vikramajit Sen, J.—

IA No. 3200/2004

1. This application seeks the recall of the following Order dated 18.3.2004 passed by my learned Brother Dr. Mukundakam Sharma, J.:

“I have seen the affidavit of service filed by the petitioner in the present case. I have also gone through the noting of the security personnel posted at the address of the respondent, which is recorded in the summons and also have perused the report of the Process Server. On going through the same although I am satisfied that service, as required under the law, is effected on the defendant yet in the interest of justice, I direct that fresh service be effected on the respondent by way of affixation. The Process Server is directed to have the service effected once again by way of affixation on the boundary wall of the factory of the respondent. This process shall be completed within two weeks from today.

Renotify on 12th April, 2004. The interim order passed on 19th February, 2004 shall continue to operate until the next date. It is also ordered that the respondent, their servants, agents and all other acting on their behalf would not sell and/or alienate the brewery unit situated at Village—Tokion, P.O-Majra, Tehsil-Paonta Sahib, Sirmour, Himachal Pradesh, till the next date.”

2. On the preceding and first date of hearing held on 19.2.2004, the following Order had been passed:—

“Issue notice to the respondent by registered AD post as also through one of the approved courier agencies, for 18.3.2004 It shall be indicated in the notice that reply, if any, shall be filed before two weeks of the next date. Rejoinder thereto, if any, could be filed before the next date. Notice may be served on the respondent dasti as well. This petition shall be taken up for consideration on the next date.

In the meantime, the respondent is restrained from selling, alienating or in any manner creating third party interest in respect of (i) finished stock of 11200 cases of Haywards 5000 Brand beer, (ii) stock of raw materials malt 16 tones hops 150 kgs sugar 2800 kgs. etc., (iii) stock of packing materials: Bottles 80,000 nos. Cartons 3800 nos. Labels 5,40,000 nos. etc. until further orders.”

3. I shall, in the interests of justice, assume that the Respondent intended to also press for the retail of the said ex parte ad interim injunction dated 19.2.2004 although the prayer does not speak so. Mrs. Maneesha Dhir, learned counsel for the Respondent relies on Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (‘SICA’ for short) to contend that the Orders passed on the first two hearings of these proceedings deserve to be recalled. It has been pleaded in paragraph 4 of the application that “in view of section 22(1) of sica, no coercive recovery proceedings against the Respondent company shall lie or be proceeded with without the permission of BIFR. However, in breach of the settled proposition of law, by misuse of process of law, the Applicant in misrepresented before the Hon'ble Court and succeeded in obtaining an ex parte restraint Order on 18.3.2004”

4. As far back as in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association, AIR 1992 SC 1439, the Apex Court has enunciated the law in the context of SICA to be that a cessation of legal proceedings would be justified only if the dues in respect of which adjudication is ongoing is also included in or within the contemplation of the Scheme presented to BIFR.

5. In Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals, AIR 1997 SC 2027 : (1997) 10 SCC 649 the Apex Court had analysed and distinguished its previous decisions in Gram Panchayat v. Shree Vallabh Glass Works Limited, (1990) 2 SCC 440 as well as Maharashtra Tubes Ltd. v. State of Industrial & Investment Corporation of Maharashtra Ltd., (1993) 2 SCC 144 on the reasoning that in those cases the liability of the sick company had arisen for the first time after the sanction of the Scheme by the Board of Industrial and Financial Reconstruction (BIFR). Their Lordships observed thus:

“Any step for execution, distress or the like against the properties of the industrial company other of similar as steps should not be pursued which will cause delay or impediment in the implementation of the sanctioned scheme. In order to safeguard such state of affairs, an embargo or bar is placed under Section 22 of the Act against any step for execution, distress or the like or other similar proceedings against the company without the consent of the Board or, as the case may be, the appellate authority. 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 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.

11. 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 and another v. Shree Vallabh Glass Works Ltd. and others [1990 (2) SCC 440] and Maharashtra Tubes Ltd. v. State Industries & Investment Corporation of Maharashtra Ltd. and another [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 itself arose, for the first time after the date of sanctioned scheme. Any any ate, in none of those cases, a situation arose whereby the sick industrial unit was enabled to collect tax due to the Revenue from the customers after the “sanctioned scheme” but the sick unit simply folded its hands and declined to pay it over to the Revenue, for which proceedings for recovery, had to be taken. The two decisions of this Court as also the decisions of High Courts brought to our notice are, therefore, distinguishable. They will not apply to a situation as has arisen in this case. We are, therefore, of the opinion that Section 22(1) should be read down or understood as contended by the Revenue. The decision to the contrary by the High Court is unreasonable and unsustainable. We set aside the judgement of the High Court and allow this appeal. There shall be no order as to cost.”

6. In Sirmor Sudburg Auto Ltd v. Kuldip Singh Lamba., [1998] 91 Com.Cas 727, R.C Lahoti, J., as the Learned Chief Justice of India then was opined that “to be entitled to stay of the legal proceedings u/s. 22 of the Act a mere pendency of the enquiry would not suffice, the dues must be reckoned or included in the sanctioned scheme. A suit for eviction against a sick industrial company is not liable to be stayed under Section 22 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985.” This decision has been followed by the Division Bench of the Calcutta High Court in Taulis Pharma Ltd. v. Bengal Immunity Ltd., [2002] 108 Comp.Cas 237. Similar views have also been expressed in Vibgyar Ink Chem (Pvt.) Ltd. v. Safe Pack Polymers Ltd., [1998] 93 Com.Cas 407, which is also a decision of the Division Bench of the Andhra Pradesh High Court. Justice Umesh C. Banerjee, while as the Chief Justice of that High Court, had inter alia observed as follows:

“It is not the intention of the law court, in our view, to expand the scope of legislation and one ought not to read anything further than one reads in plain and simple manner, Admittedly, the company, while the matter is pending before the Board, has enjoyed the benefits of these supplies. The Board has not been able to consider these claims. Obviously, the scheme as framed also has no reference to the claim of the petitioner, a creditor. Does that mean and imply the petitioner-creditor shall have to wait until after the fullest implementation of the scheme, in terms of the scheme, as sanctioned by the Board? It is an independent transaction de hors the scheme and obviously cannot thus be covered within the ambit of section 22 of the 1985 Act.”

7. Justice Lahoti's view has also been followed by a Single Bench of the Calcutta High Court in Fort William Industries Limited v. Usha Bentron Limited, [2002] 108 Comp. Cas. 176. My learned Brother Dr. Mukundakam Sharma, J. has, in the Cement Corporation of India v. Manohar Basin, 82 (1999) Delhi Law Times 343 : 1999 (51) DRJ 535 observed that since no documentary proof had been furnished to disclose that any scheme stood sanctioned the so-called SICA bar was not attracted.

8. A Single Bench of the Bombay High Court in Special Steels v. Jay Prestressed Products Ltd. [1991] 72 Comp.Cas 277 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 (1979) 3 SCC 345 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.

8. Reliance has been placed on the judgment of R.C Jain, J. in Uppal Engineering Co. (P) Ltd. v. Cimmco Birla Ltd., 121 (2005) Delhi Law Times 539 : 2005 (84) DRJ 608 which runs contrary to the opinion expressed above as well as by Mafatlal Industries Ltd. & Anr. v. Mahanagar Telephone Nigam Ltd., 99 (2002) Delhi Law Times 204 : 2002 (64) DRJ 94 and by me in Atul Limited…Petitioner v. Prakash Industries Ltd…, 104 (2003) Delhi Law Times 351 : 2003 (68) DRJ 430. It is also not reconciliable with the views of the Apex Court in Corromandal and hence is per incuriam. The Petitioner therein had invoked section 9 of the arbitration & conciliation act, 1996 praying for the issuance of a direction to the State of Rajasthan to release a sum of Rs. 1.33 crores in favour of the Petitioner or in the alternative to place the said sum in a secure account till rights and liabilities of the parties are finally adjudicated upon in the arbitral proceedings. The following passage from Maharashtra Tubes calls for careful cogitation:

“The purpose and object of suspension of proceedings, etc. under Section 22(1) of the 1985 Act is to await the outcome of the reference made to the BIFR for the revival and rehabilitation of the sick industrial company. The words ‘or the like’ which follow the words ‘execution’ and ‘distress’ are clearly intended to convey that the properties of the sick industrial company shall not be made the subject-matter of coercive action of similar quality and characteristic till the BIFR finally disposes of the reference made under Section 15 of the 1985 Act. The Legislature has advisedly used an omnibus expression ‘the like’ as it could not have conceived of all possible coercive measures that may be taken against a sick undertaking. Section 29 of the 1951 Act permits coercive action against the defaulting industrial concern of the type which would be taken in execution or distress proceedings, the only difference being that in the latter case the concerned party would have to use the forum prescribed by law for the purpose of securing attachment and sale of property of the defaulting industrial concern whereas in the case of a Financial Corporation that right is conferred on the creditor corporation itself which is permitted to take over the management and possession of the properties and deal with them as if it were the owner of the properties. If the Corporation is permitted to resort to the provision of Section 29 of the 1951 Act while proceeding 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.

The expression ‘proceedings’ in Section 22(1) must be widely construed. It cannot be confined to legal proceedings understood in the narrow sense of proceedings in a Court of law tribunal for attachment and sale of the debtor's property, notwithstanding the use of that expression in the marginal note.” (underlining added by me)

Thereafter R.C Jain, J. returned the finding that the relief prayed for before him was clearly of the kind which would be categorized as ‘distress or the like thereof and consequently could not be proceeded with except with the consent of the Board or the Appellate Authority. The decision in Mafatlal had been relied upon by learned counsel for the Applicant in those proceedings. The approach preferred by me in Atul Limited (in the hearing of which the Mafatlal decision had not been cited) was to the effect that the appointment of a Receiver in respect of a SICA company was permissible. Relying on Corromandal, I had expressed the opinion that the bar of section 22(1) of sica would apply only to disputes reckoned or included in the sanctioned scheme. Jural experience is that companies most often initiate proceedings under SICA in order to escape or procrastinate an adjudication of their liabilities and debts. Where a claim of a party had not been included in the Scheme presented to BIFR, the preponderant opinion is that Courts can continue legal proceedings.

9. There is yet another aspect to the present dispute. As has already been noted the SICA embargo is in respect of distress proceedings or injunctions/orders in the genre of distress. The appointment of a Receiver despite pendency of proceedings before BIFR could justifiably be viewed as distressful to the sick company, yet such appointments have been made. The injunctions passed in these proceedings on 19.2.2004 as well as 18.3.2004 are preservatdry rather than distressful. The Uppal Engineering partake of the nature of distress inasmuch as a sum of Rs. 1.33 crores had been taken out of the funds available to the sick company. In the present case the interim Orders are calculated to ensure that the assets of the sick company are not dissipated or frittered away. Such Orders do not fall within the moratorium of Section 22 of SICA.

10. There is, therefore, no warrant whatsoever for modifying the Orders dated 19.2.2004 and/or 18.3.2004 The application is dismissed, being devoid of merit. These Orders are made absolute. They shall, however, be subject to modification by the learned Arbitrator, at his discretion, if circumstances require a modification during the pendency of the Arbitration. Needless to say the learned Arbitrator shall be free to pass whatever Orders he considers expedient in the final Award.