w w w . L a w y e r S e r v i c e s . i n



Ajanta Infrastructures Ltd rep by its Power Holder K. Vaidyanathan v/s Pennar Steels Ltd. rep by its Managing Director & Others

    C.R.P. (NPD) No.189 of 2009 and M.P.No.1 of 2009

    Decided On, 25 March 2009

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE A.C. ARUMUGAPERUMAL ADITYAN

    For the Petitioner: V. Raghavachari, P. Valliappan, Advocates. For the Respondent: R1, Srinath Sridevan, R2, S.S. Raju, Advocates.



Judgment Text

(Prayer: Civil Revision Petition is filed under Section 115 of CPC, against the fair and decretal order dated 20.10.2008 in E.A.No.10 of 2007 in E.P.No.1 of 2007 on the file of Principal District Judge, Thiruvallur.)


This revision has been directed against the order passed in E.A.No.10 of 2007 in E.P.No.1 of 2007 on the file of the Court of Principal District Judge, Thiruvallur. E.A.No.10 of 2007 in E.P.No.1 of 2007 is a petition filed under Section 47 of CPC r/w 151 CPC seeking indulgence of the Executing Court to dismiss the execution petition. The Decree holder in O.S.No.1159 of 1993 on the file of the Second Senior Civil Judge, City Civil Court, Hyderabad to execute the decree in O.S.No.1159 of 1993 had filed E.P.No.1 of 2007 before the Court of Principal District Judge, Thiruvallur after getting the decree transferred. The decree was a transferred for execution. The petitioner in E.A.No.10 of 2007 in E.P.No.1 of 2007 viz., the Auto Mobile Products of India Limited represented by its Director Vaidyanathan and two others who are the defendants in O.S.No.1159 of 1993 on the file of the Second Senior Civil Judge, City Civil Court, Hyderabad had challenged the decree on the ground that on the date of passing of the decree in O.S.No.1159 of 1993, B.I.F.R proceedings were pending and under Section 22 of the Sick Industrial Companies(Special Provisions) Act 1985(hereinafter referred to "Act") the decree itself is void and cannot be executed. Even though the said E.A.No.10 of 2007 was filed before the Executing Court under Section 47 of CPC, there was no oral or documentary evidence let in by the petitioner in E.A.No.10 of 2007 in E.P.No.1 of 2007. On the basis of the available materials and after due submissions made by the learned counsel on both sides, the learned Executing Court had dismissed the E.A.No.10 of 2007 in E.P.No.1 of 2007 which necessitated the petitioner in E.A.No.10 of 2007 in E.P.No.1 of 2007 to approach this Court by way of this revision.


2. The learned counsel appearing for the revision petitioner relying on an order passed by the Board for Industrial and Financial Reconstruction in Case No.36 of 1992 dated 24.10.1997 would contend that the BIFR proceedings against the revision petitioner was pending even on the date of Judgment in O.S.No.1159 of 1993 on the file of the Second Senior Civil Judge, City Civil Court, Hyderabad and hence the decree passed in O.S.No.1159 of 1993 is hit by Section 22 of the Act. This argument of the learned counsel for the revision petitioner was meted out by the learned counsel appearing for the first respondent by drawing the attention of this Court to Paragraph 2 of the order passed by the Board for Industrial and Financial Reconstruction in case No.36 of 92(Page 36 of the typed set of papers) wherein the relevant observation runs as follows:


"As the company APIL ceased to become a sick Indusutrial Compny, within the meaning of Section 3(1)(o) of the Act, the Board, vide its order dated 20.2.2004,discharged the company from the purview of SICA/BIFR, with the direction that the un-implemented provisions of the SS-96, as may be there, would be implemented by the concerned agencies and their implementation would continue to be monitored by the Company and after the revision petitioner was discharged by the SICA/BIFR, it had received notice from EPFO and ESIC demanding penalty/damages to the tune of Rs.1.25 Crores outstanding for the period from December 1992 to October 2003 and also the revision petitioner brought to the notice of the Board that ESIC has also issued demand notice for payment of Rs.0.90 Crores towards damages and penal charges outstanding for the period from February 2003 to March 2004, approached the Board through their letter dated24.9.2007. The Board in its order in Case No.36/92 at paragraph 4(ii) has directed both EPFO and ESIC to waive the penalty/damages claimed on the revision petitioner herein under their demand notices/orders dated 11.8.2005 and 7.11.2006 respectively relating to the unexpired period of scheme sanctioned by the Board on 14.11.1996".


3. So it is clear that the scheme was also sanctioned as early as on 14.11.1996 and that the revision petitioner was discharged from the purview of SICA/BIFR as early as on 20.2.2004. So it is clear from the Board's orders in Case No.36/92(Page 376 of the typed set of papers) that on the date of the impugned Judgment in O.S.No.1159 of 1993 dated 9.3.2004, the revision petitioner was discharged from the purview of SICA/BIFR and so the revision petitioner cannot take shelter under Section 22 of the Act and would further contend that the Judgment of the Second Senior Civil Judge, City Civil Court, Hyderabad in O.S.No.1159 of 1993 is unexecutable or void.


4. Section 22 of the Act reads as follows:


"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, except with the consent of the Board or, as the case may be, the Appellate Authority.


(2) Where the management of the sick industrial company is taken over or changed (in pursuance of any scheme sanctioned under Section 18) notwithstanding anything contained in the Companies Act, 1956(1 of 1956) or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law-


(a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the Company;


(b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board.


(3) . . .. . ... .


(4). . . . . . .


(5). . . . ... .


Absolutely there was no material placed before the Executing Court/Principal District Court, Thiruvallur to show that an inquiry under Section 16 or any scheme referred to under Section 17 was pending at the time of pendency of O.S.No.1159 of 1993 on the file of the Second Senior Civil Judge, City Civil Court, Hyderabad.


5. The learned counsel appearing for the revision petitioner relying on an unreported Judgment in W.P.No.26287 of 2004 dated 19.4.2005 by a learned Judge of this Court would contend that the revision petitioner is entitled to protection under Section 22 of the Ac t. For this , the learned counsel would based his reliance at paragraph 13 of the Judgment in the above writ petition which runs as follows:


"When the relevant words in Section22 are clear and unambiguous and it is clear that they are intended to protect the assets of the company from being subject to any proceedings or suits as described in Section 22(1) and when such proceedings and suits cannot lie or be proceeded with further except with the consent of the Board or the appellate authority, no fresh proceeding or suit can be initiated or filed and no pending suit or proceeding can be dealt with except as contemplated in Section 22. Once a scheme is prepared under Section 18 of the Act, then Section 18(2) provides for continuation of such proceedings against the sick industrial company or the transferee company which were pending against the sick industrial company before the date of the order made under Section 17(3) of the Act. Therefore, Section 18(2) takes into its ambit the proceedings or suits which could not be proceeded with further because of Section 22(1) of the Act."


There cannot be two opinion with regard to the said observation made by the learned Judge.


6. As seen from the order in Case No.36/92(page 36 of the typed set of papers) a scheme was sanctioned by the Board for the revision petitioner Company as early as on 19.7.1996 itself and as per the provisions contemplated under Scheme the interest of the revision petitioner has been protected. It is seen from the order in C.No.36/92 that the revision petitioner has positively turned out of assets as on 30.9.2001 and even thereafter it maintained the positivenss even on the date of passing of the order in C.No.36/92. As per the order in C.No.36/92, the Board has discharged the revision petitioner herein from the purview of SICA/BIFR as early as on 20.2.2004 itself. Under such circumstances, since the revision petitioner has been discharged from the purview of SICA/BIFR it cannot be contended that the revision petitioner can take shelter under Section 22 of the Act. It is pertinent to note at this juncture that so far the Judgment in O.S.No.1159 of 1993 on the file of the Second Senior Civil Judge, City Civil Court, Hyderabad was not challenged by the defendants before any of the appellate forum. On the other hand, it is admitted that an interlocutory application has been filed before the Court to set aside the exparte decree. Once, the revision petitioner challenges the jurisdiction of the Court which passed the Judgement in O.S.No.1159 of 1993 then it is not open to the revision petitioner to file a petition to set aside the exparte decree before the same Court which will tantamount indirectly to accepting the jurisdiction of the said Court.


7. The ratio decidendi laid down in Rafique Bibi(dead)by Lrs-v-SayedWaliuddin(dead) by LRS(2004(1) Supreme Court Cases,287) is that the decree passed by the Court which has no jurisdiction is void/null decree/illegal decree. But there is absolutely no material placed to hold that the decree passed in O.S.No.1159 of 1993 by the Second Senior Civil Judge, City Civil Court, Hyderabad is without any jurisdiction. So the said dictum will not be applicable to the present facts of the case.


8. The other Judgment relied on by the learned counsel for the revision petitioner in Ekram Hussain-v-Mt.Umatul Rasul(AIR 1931 Patna 27) is also of no avail to the revision petitioner because the point that arose for consideration in the said case was whether the execution can be defeated because for want of trial Court to make a fresh order of transfer subsequent to the affirmation of the decree by the first appellate Court. The revision petitioner does not question the jurisdiction of the executing Court which had passed an order under a transferred decree. The revision petitioner questions only the jurisdiction of the Court which passes the Judgment. Under such circumstances, the principle laid down in A.I.R.1931 Patna 27 will not be applicable to the present facts of the case.


9. The learned counsel appearing for the revision petitioner also based on his reliance on the dictum in Ettappa Nayakar Avergal, Zamindar of Ettayapuram-v- Chidambaram Chetty(Volume 39 M.L.J.203) which also deals with the Jurisdiction of the Court wherein the dictum under Section 21 of CPC will be applicable only suits and proceedings in suit does not apply to proceedings in execution. The relevant observation in the above said dictum runs as follows:


"Assuming, however,that Section 21 does not apply, I am still of opinion that the present decree cannot be questioned in execution. An objection to the jurisdiction is a ground for setting aside the decree and is not one of those questions relating to the " Execution, discharge or satisfaction of the decree" which are required by Section 47 to be dealt with in execution."


10. The learned counsel appearing for the revision petitioner in support of his contention relied on a decision reported in M/s Sivananda Steels Ltd Plot No.18,19 and 20, Industrial Estate,Ambattur, Chennai-58 -vs- M/s India Cements Capital Finance Ltd., No.28, Sterling Road, Chennai-34(2004(1)CTC 346) wherein the relevant observation at paragraph 9 is as follows:


"A cursory reading of Section 22(1) of the Sick Industrial Companies(Special Provisions) Act, 1985, makes it clear that under Section 22, when an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, no proceedings for 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 the Appellate Authority, as the case may be."


As I have already referred to above, there is absolutely no material placed before the Court to show that an inquiry under Section 16 or under Section 17 of the Act is pending before the Board or an appeal under Section 25 of the Act relating to the revision petitioner Company is pending. Under such circumstances, it is not open to the revision petitioner to contend that he is entitled to the benefit under Section 22 of the Act. The same proposition has been reiterated in the dictum of this Court reported in Jairaj-vs- B.Champalal Jain (2004(2) CTC 151) in the following terms.


"In Patheja Bros. Forging and Stamping-v-ICICI (SC) 2000(102 ) Company Cases,21, the Supreme Court of India has held that the suit for the enforcement of the guarantor in respect of the loan granted could not be proceeded with unless consent as required by Section 22 is obtained. In Ravi Srinivasan,BV-v- Manipal Finance Corporation Ltd,2002(4)CTC 219)while considering the provisions of the Presidency Tows Insolvency Act and Sick Industrial Companiwes(Special Provisions) Act,1985, I have held that the benefit conferred on the principal debtor is applicable to the guarantor. . . . . . . .It is settled law that once a company is registered with the BIFR, all proceedings filed against a company and its guarantors must be stayed forth-with and shall not be proceeded with without the consent of BIFR. Section 22 imposes a prohibition on recovery from guarantors of the sick industrial Company. The purpose behind such a provision is to prevent the isolated burdening of the guarantor or c

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o-obligant with the debt of the sick industrial company, until recovery can be commenced against the sick industrial company itself, which fact has been disregarded by the learned trial Judge. Further, the materials placed clearly show that the loan was granted to the sick industrial company and that the petitioner was only the Director of the Company. It is also clear that the petitioner has signed the debt instrument only as a Director on behalf of the sick industrial company and I hold that the benefit of Section 22 of the Act will accrue to him. By virtue of the provisions of Section 22 of the Act, all co-obligants are also entitled to the benefit of stay in terms thereof, until permission is obtained from the BIFR." But as I have already observed that even before the date of Judgment in O.S.No.1159 of 1993 on the file of the Second Senior Civil Judge, City Civil Court, Hyderabad, the revision petitioner herein was discharged from the purview of BIFR as early as on 20.2.2004 itself. For the same proposition of law, the learned counsel appearing for the first respondent would also rely on a decision reported in DCM Hyundai Ltd-v- Sita World Travels(I) Ltd(2004(4) CTC 204). Under such circumstances, I am of the view that the impugned order under challenge requires no interference from this Court. 11. In fine, this civil revision petition is dismissed confirming the order of the learned Principal District Judge, Thiruvallur in E.A.No.10 of 2007 in E.P.No.1 of 2007 in O.S.No.1159 of 1993 on the file of Second Senior Civil Judge, City Civil Court, Hyderabad. No costs. Consequently, connected M.P.No.1 of 2009 is closed.
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