Kandhari Rubber Ltd. vs Modi Rubber Ltd. and Others

Badar Durrez Ahmed, J.—This is an application filed on behalf of the defendants u/s 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 for staying further proceedings in the present suit. The suit has been filed by the plaintiff seeking recovery of money from the defendants.

The learned counsel for the defendants has stated with reference to the contents of this application that the defendants filed a reference dated 03.02.2004 before the Board of Industrial and Financial Reconstruction, Department of Economic Affairs, (Ministry of Finance), (hereinafter referred to as the ''BIFR'') under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the ''said Act''). He further stated that the reference which was filed on 03.02.2004 by the defendants u/s 15 of the said Act ultimately came to be registered after scrutiny on 17.03.2004 as indicated by a letter issued by the Registrar of BIFR. A copy of the said letter is annexed with the application which clearly shows that the defendants'' reference dated 03.02.2004 which was received on 04.02.2004 stands registered as Case No. 153/2004. In view of this, the learned counsel for the defendants submits that this being a suit for recovery of money, further proceedings cannot take place in view of the expressed provisions of Section 22 of the said Act.

The condition precedent for application of the provisions of Section 22 is that, inter alia, an enquiry u/s 16 must be pending. There was some arguments on the issue as to whether the enquiry u/s 16 is pending or not in the facts of the present case. The learned counsel for the plaintiff submitted that there was no pending enquiry as there was no document to support the same. The learned counsel for the defendants further submitted that the intimation from the BIRF with regard to the registration of the case is sufficient evidence of the pendency of an enquiry u/s 15 of the said Act. For this purpose, he placed reliance on a decision of the Supreme Court in the case of Real Value Appliances Ltd. v. Canara Bank and Ors. 1985 (5) SCC 554 wherein it was clearly held in paragraph 23 thereof that the enquiry must be treated as having commenced as soon as the registration of the reference is completed after scrutiny. It has also been held in the said decision that from that time, action against the Company''s assets must remain stayed as stated in Section 22 till a final decision is taken by the BIFR or consent of the BIFR is obtained for continuing with the proceedings. In view of the clear position of law as indicated by the Supreme Court, there can be no dispute that an enquiry u/s 16 is pending inasmuch as the defendants'' reference has been registered after scrutiny. Since there is no consent of the BIFR for proceeding with the present proceedings, it is clear that in view of the provisions of Section 22, the present suit cannot be proceed with any further.

This application is accordingly allowed and further proceedings in this suit are suspended sine die. It is made clear that it is open to the plaintiff to obtain consent of the BIFR for proceeding with the present suit.

The application stands disposed of.

CS(OS) No. 313/2001

In view of the orders passed in is No. 4737/2004, further proceedings in this suit stand adjourned sine die.