(This Writ Petition is filed under Articles 226 & 227 of the Constitution of India praying to quash the impugned order dated 22/07/2008 (Annexure-?D?) to the Writ Petition and further direct the Execution Case No.48 of 2007 to be stayed, till disposal of the reference in case No.21 of 2007 on the file of BIFR.)
The petitioner ? judgment debtor has assailed the order dated 22.7.2008 in Execution Case No.48/2007 on the file of Prl.District Judge, Bangalore Rural District, Bangalore.
2. After filing of the writ petition, petitioner filed an application under Order VI Rule 17 of CPC for amendment of the petition seeking quashing of the order dated 12.12.2008 produced at Annexure-H wherein the Executing Court has issued an arrest warrant against the Directors.
3. By the impugned order at Annexure-D, the Executing Court has rejected the objections raised by the judgment debtor against the order of attachment of movables of the judgment debtor on the ground that, no material is produced as regard to the alleged proceedings pending in Reference Case No.21/2007 stated to be pending before the B.I.F.R. Thereafter, the Executing Court on failure of the judgment debtor to furnish the details of the assets under Order XXI Rule 41 of CPC, passed an order for issue of arrest warrant against Sri. M.V. Ramdas, Director of judgment debtor Company. It is against both the orders, this petition has been filed.
4. Sri. Naik, learned Counsel appearing for the petitioner submitted that, petitioner had produced Annexure-B, a copy of the letter issued by the Registrar of Board for Industrial and Financial Reconstruction (B.I.F.R.) inter alia stating that, the reference has been registered in Case No.21/2007 and in view of the same, the proceedings in Execution Case could not have been proceeded, as there is a bar under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (?Act? for short). He relied on the provisions of Section 22(1) of the Act and submitted that, no suit for 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. In view of the said provision, the Executing Court ought not to have proceeded in the matter, as there is a statutory bar. He further relied on Annexure-E to show that, the enquiry under Section 16 of the Act is being held and, in view of the provisions of Section 22 sub-section (1) and sub-section (3) of the Act, the execution proceedings ought not to have been continued by the Executing Court.
5. On the other hand, Ms. Jayna Kothari submitted that, reading of the provisions of Section 22 sub-section (1) of the Act only prevents the proceedings against the properties of the industrial company or company and does not prohibit any other mode of execution. In this regard, she relied on the judgment reported in AIR 2000 SC 926 in the matter of M/s. BSI Ltd, and Another Vs Gift Holding Pvt. Ltd. - Para-13 and submitted that, the Apex Court while considering the ban imposed under Section 22(1) of the Act has explained ban of legal proceedings only in respect of winding up of a company, proceedings for execution, distress or the likes against any of the properties of the company, proceedings for the appointment of a receiver in respect of such properties and suits for recovery of money or for enforcement of any security against the company or guarantee in respect of any loan or advance granted to the company. She further relied on another decision of the Apex Court reported in AIR 1990 SC 1017 in the matter of The Gram Panchayat and Another vs. Shree Vallabh Glass Works Ltd. And Others and submitted that, the Apex Court considering the scope of Section 22 of the Act has held that the execution proceedings against the industrial companies are banned only against the properties of the industrial company or company only. She also relied on another decision of Madras High Court reported in Company Cases (Vol.106) 2001 page 624 in the matter of S & S Industrial and Enterprises Ltd. Vs. Union of India and Others and submitted that, considering the scope and ambit of Section 22 sub-section (1) of the Act, the Madras High Court has held that, the embargo placed under Section 22 of the Act should be construed strictly for the limited purpose i.e., preventing execution proceedings, winding up proceedings or appointment of Receiver as against the sick industrial company and its properties. However, Section 22 does not prohibit for executing the decree by any other mode and submitted that, arrest warrant in this case is issued against the Director of the Company, not against the Company?s property or the Company. As such, the provisions of Section 22 of the Act are not applicable to the facts and circumstances of the case.
6. Insofar as the pendency of proceedings under Section 15 of the Act in reference to the instance of the judgment debtor is not in dispute and also it is stated that the matter is pending for enquiry under Section 16 of the Act. In case of registration of reference under Section 15 of the Act and an enquiry under Section 16 of the Act, Section 22(1) of the Act, prohibits the proceedings against the company or company?s properties for the recovery of debt. The Apex Court in a judgment reported in AIR 1998 SC 2064 in the matter of Real Value Appliances Ltd. Vs. Canara Bank and Others has held that, once the reference is registered, the execution proceedings cannot be initiated or proceeded against the company or its properties. However, while considering the scope of Section 22 of the Act, the Apex Court in the matter of M/s. BSI Ltd. And Another vs. Gift Holdings Pvt. Ltd. (supra) has explained the scope of Section 22 sub-section (1) of the Act and observed that the ban is against the proceedings for the winding up of the company; proceedings against execution, distress or the like against any of the properties of the company; proceedings for appointment of Receiver in respect of such properties and suits for recovery of money or for enforcement of any security against the company or guarantee in respect of any loan or advance granted to the company. Neither Section 22 sub-section (1) of the Act nor the judgment of the Apex Court in AIR 2000 SC 926 as well as in AIR 1990 SC 1017 referred to above, states any prohibition of recovery or execution by any other mode. Prohibition under Section 22(1) of the Act specifically safeguards the company and its property or properties. The object appears to be to protect the company and its property or properties till the proceedings under the provisions of the Act is completed, as there would be possibility of revising of the company or rehabilitating the company. It is in this background the company and its properties are protected from sale or destroyed for recovery of the debt. But reading of Section 22(1) does not prohibit any other mode of execution or against the person other than the company and its properties. The ban is confined to the extent of the company and company?s properties are concerned, as to protect such properties, still scheme is to be framed by B.I.F.R or the reference is disposed of.
7. The Madras High Court considering the scope of Section 22 sub-section (1) of the Act and also the decision of the Apex Court has observed that ban is limited to the extent specified under Section 22(1) of the Act and not beyond that and it does not restrict or prevent the decree holder to proceed against the Directors in their individual capacity. In this case, the arrest warrant is issued against the Director and not against the Company, there is no such ban under Section 22(1) of the Act to prevent the Executing Court to proceed against the person or any other mode other than against the company and company?s property.
8. Sri. Naik, learned Counsel for the petitioner submitted that, the warrant is issued for not furnishing the particulars of statement regarding assets of the Company under Order XXI Rule 41 of CPC, he submitted that if reasonable time is given, the petitioner will furnish the details of the assets of the company.
9. Learned Counsel for the decree-holder submitted that, reasonable time be granted, however, she submitted that, exec
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ution proceedings cannot be stopped from proceeding as against other persons or in any other mode other than against the company or the company?s properties. In view of the submission made by both the Counsel, I pass the following order: The writ petition is allowed. The impugned order is set aside. The petitioner is directed to furnish the statement within 30 days from the date of receipt of copy of this order and it is also made clear that the Executing Court is prevented from proceeding with the company and company?s properties, however, there is no bar to proceed in any other manner other than against the Company and its properties. The parties are directed to appear before the Executing Court on 28th May 2010, on which date the judgment debtor shall file its statement as directed by the Executing Court, and thereafter the Executing Court shall proceed with the matter in accordance with law.