PARKASH INDUSTRIES LIMITED vs BRIJ BHUSHAN MITTAL

BY this order we propose to dispose of 15 appeals i.e. Appeals Nos. 88 to 102 of 2000 filed against the order of the District Forum-II, U.T., Chandigarh. All the appeals have been filed by Parkash Industries Ltd. through Shri I.D. Sharma, Corporate Advisor of the Parkash Industries Ltd. In all the appeals the common point involved and raised is about the appellant-Company having been treated as sick industry under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (in short hereinafter referred to as SICA) by the Board of Industrial and Financial Reconstruction (in short hereinafter referred to as B.I.F.R.) and as such the District Forum should have acted under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and suspended the complaint filed by the respondent. The learned Counsel for the appellant and the learned Counsel for the respondent during the course of arguments have referred to the record of Appeal No. 92 of 2000 i.e. Parkash Industries Ltd. v. Brij Bhushan Mittal. Accordingly, the facts involved in this case are being referred from the complaint filed before the District Forum in this case by Shri Brij Bhushan Mittal against Parkash Industries Ltd. and others. The respondent in this case deposited a sum of Rs. 20,000 / - with the appellant Parkash Industries Ltd. in response to the scheme floated by the appellant promising to pay the maturity value of the deposits made with the Company within a particular time frame. The complainant deposited the amount and were allotted Secured Redeemable Non-convertible Debentures (NCDs) in different schemes redeemable at the expiry of the stipulated period from the date of allotment. Since the complainant was not paid the maturity value of his deposit inspite of repeated requests, hence he filed the complaint before the District Forum under the Consumer Protection Act, 1986.

THE opposite parties impleaded in the complaint which was registered as Complaint No. 935 of 1998 were Parkash Industries Ltd., Business Park, 25, Shivaji Marg, New Delhi, Harjeet Arora and Co. SCO. No. 22-23 (2nd Floor), Sector 9-D, Chandigarh and the Industrial Finance Corporation of India, Bank of Baroda Building, 16, Sansad Marg, New Delhi. THE appellant - Company i.e. Parkash Industries Ltd. sent reply through registered A.D. post; vide letter dated 10.12.1998 to the President of the District Forum-II, U.T., Chandigarh. It was averred, inter alia, in the reply that "...the performance of the Company during the year 1997-98 suffered adversely and there was a net loss of Rs. 320 crores. As a result of these losses, the Company''s net worth has turned negative as on 31st March, 1998 and accordingly, the Company has become a "sick company'' and on a reference being made to the Hon''ble Board of Industrial and Financial Reconstruction (BIFR) pursuant to the provisions of Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, the Company has been declared a Sick Company and registered at SI. No. 107/98". It was further averred that it appointed Industrial Finance Corporation of India Ltd. (IFCI) as an "Operating Agency'' to prepare a scheme to make the Company viable. THEreafter, reference was made to Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and it was urged that Forum had no jurisdiction in the matter and the complaint was not maintainable and deserves to be dismissed. The District Forum after hearing the learned Counsel for both the sides repelled the contention of the appellant about the applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and held that the complaint alongwith other complaints involved in the remaining appeals were not required to be stayed or dismissed on the ground urged in the reply of the appellant. Consequently, the complaint was allowed with costs and the District Forum passed the following order : "Consequently, we allow all the complaints with costs of Rs. 550/- in each case and direct the opposite party M/s. Parkash Industries Ltd. to make payment of the maturity value of the deposit in Complaint No. 932/98 and refund the principal amount deposited by the complainants in other cases alongwith interest at the agreed rate as per the stipulated terms and conditions of the deposit. The opposite party is further directed to pay interest at the rate of 12% per annum on the amounts becoming so due to the complainants in each case for the extended period beyond the due date, till payment."

The District Forum directed that the compliance of the order be made within one month of the receipt of the copy of the order which was directed to be sent to the parties free of charges. As would appear from the impugned judgment and order passed by the District Forum-II, all the complaints were decided in the same terms by the common judgment. Parkash Industries Ltd. has filed 15 separate appeals in all the complaint cases. As stated earlier we are disposing of all the appeals by this common judgment.

We have heard the learned Counsel for the appellant and learned Counsel for the respondent and have carefully perused the judgment of the District Forum-II, U.T., Chandigarh. At the very outset it may be pointed out that in all the complaints out of which these appeals have arisen, the complainants responded to the scheme floated by the appellant-Company inviting deposits to be made. The complainants in all these cases made deposits of various sums which have been detailed in Para 1 of the judgment of the District Forum-II. The factum of deposit of the amount in pursuance to the scheme floated by the appellant Company is not in dispute. The sole defence that was taken by the appellant before the District Forum was that the Company had been declared a Sick Company by the B.I.F.R. and I.F.C.I. had been appointed as Operating Agency for preparing a scheme to make the Company viable. The complaints in ail the cases deserved to be dismissed under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. As a matter of fact, the appellant had taken a plea that the District Forum had no jurisdiction in the matter and the complaint was not maintainable. If we peruse the provisions of Section 22 of the S.I.C.A. it will be abundantly clear that the said Section 22 of the Act provides for suspension of legal proceedings/contracts etc. There is no provision under Section 22 of the Act for dismissing the complaint or legal proceedings for want of jurisdiction. It may be mentioned that if appellant Company had not been declared sick Company under the Sick Industrial Companies (Special Provisions) Act, 1985, the complainant had a legal right to approach the District Forum under the Consumer Protection Act by means of a complaint claiming the relief i.e. for the refund of the amount deposited by them with interest thereon. The learned Counsel for the appellant drew our attention to the relevant portion contained in Section 22 aforesaid which has been quoted in the reply and which reads as under: "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 of 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."

The Maharashtra State Consumer Disputes Redressal Commission, Bombay had an occasion to go into the question about the applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 in respect of the complaints filed under the provisions of Consumer Protection Act, 1986 before the District Forum/State Commission in the case of Mumbai Grahak Panchayat v. Chamundi Mopeds Ltd., reported in III (1992) CPJ 664, and held in Para 3 as under: "...The main contention of the opposite party is that as per opposite party has been declared as a Sick Industrial Company, under Section 22 of the Industrial Companies (Special Provisions) Act, 1985 (for short, "Industrial Companies Act"), this complaint is not maintainable. In support of the arguments, Shri A.H. Mehta relied on the decision of District Forum, Surat in Case No. 161/89 dated 27.6.1990 and an interim order of Karnataka High Court. We have carefully read Section 22 of the Industrial Companies Act, the aforesaid Section is in relation to suspension of legal proceedings, contracts, etc. But the said section operates only for limited purpose viz., (1) Proceedings far the winding up of the Industrial Company. (2) For execution, distress or the like against any of the properties of the industrial Company; and (3) In the appointment of a Receiver in respect in respect thereof, Section 22 lays down that no proceedings for the aforesaid three requirements shall lie or be proceeded further except with the consent of the Board or the Appellant Authority. Even for the aforesaid three requirements, the proceedings can lie with the consent of the Board or the Appellate Authority. The instant proceeding is under the Consumer Protection Act and is not for any of the three requirements of Section 22 of the Industrial Companies Act, mentioned above. The aforesaid section is very clear and puts a bar on the proceeding limited to the aforesaid three requirements only."

THE Madhya Pradesh State Consumer Disputes Redressal Commission in the case of Sol Pharmaceuticals Limited v. Mrs. Shyamala Khemani, reported in II (2000) CPJ 275, considered the applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and held in Para 12 that: "...From a plain reading of Sub-section (1) of Section 22, it is clear that in respect of a Company, on a reference made under SIC Act before BIFR, if the reference is pending before the BIFR or the Appellate Authority then no proceedings for winding-up of the Industrial Company or for execution, distress, etc. shall lie or be proceeded with further, except with the consent of the Board or the Appellate Authority as the case may be. Thus, the bar is placed on filing or continuation of any proceedings in the nature of winding-up, execution, distress etc. against any of the properties of the Company. Section 22 of the SIC Act does not put any restriction on power of the FORA or Commission given under the Act. THE proceedings under the Act are not the suit nor the complaints filed under Section 12 of the Act before the Forum are the winding-up petition of the Company or for execution, distress or the like against any of the properties or assets of the Industrial Company."

In paras 13 and 14 of the judgment in the cases of Sol Pharmaceuticals Limited v. Mrs. Shyamala Khemani, (supra), the State Commission of Madhya Pradesh had referred to the decision of the Supreme Court in the case of Deputy Commercial Tax Officer & Ors. v. Corromandal Pharmaceuticals & Ors., reported in AIR 1997 SC 1816, wherein it had been held that: "...THE Bar of Section 22 of the SIC Act applies only to such of those dues reckoned or included in sanctioned scheme for rehabilitation. Such amounts like sale 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 or could not have been intended to be covered within Section 22 of the SIC 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 a construction, which is unfair, unreasonable and against the spirit of the statute in business sense should be avoided...."

and in the case of Gujarat Steel Tube Co. Ltd. v. V. Virchandbhai B. Shah & Ors., reported in IX (1999) SLT 93=AIR 1999 (SC) 3914, a case of eviction petition against the Company for non-payment of rent under the provisions of Bombay Rents, Hotels and Lodging House Rents Control Act of 1947, the Hon''ble Supreme Court had held that: "...the provisions of Section 22 of the SIC Act do not in any way prevent the filing of eviction petition on the ground of non- payment of rent and that the order under Section 11 (4) of the Bombay Rent Act could be passed. Section 22 of SIC Act no doubt, inter alia, states that notwithstanding any other law no suit for recovery of money shall be proceeded with except with the consent of the Board, but the filing of an eviction petition on ground of non-payment of rent cannot be regarded as filing of a suit for recovery of money."

In the light of the decision of the Hon''ble Supreme Court, the State Commission of Madhya Pradesh concluded in para 15 that: "...In view of the above in our opinion the Bar created under Section 22(1) of the SIC Act for suspending or keeping the proceedings in abeyance relates to only winding-up of the industrial Company or proceedings for execution, distress or the like against any of the properties or assets of the sick industrial Companies or proceedings for appointment of the Receiver."

The learned Counsel for the respondent submitted that the amount deposited by the complainants who are respondents in all these appeals is not the amount which can be described to be an asset of the Company and as such the Bar of Section 22 of the SIC Act will not apply.

THE learned Counsel for the appellant has referred to the judgment of Hon''ble National Commission in the case of M/s. Standard Motor Products of India Ltd. v. M. Athithan & Anr., reported in I (1993) CPJ 134 (NC)=(1993) CPC 700 (NC). We have carefully gone through the judgment of the Hon''ble National Commission aforesaid and are of the considered view that the facts of the case are entirely different and distinguishable from the facts involved in all these complaints out of which these appeals have been filed. In the case of M/s. standard Motor Products of India Limited, the complainant wanted to purchase one standard van manufactured by the Company. For that purpose he got sanctioned a loan from the Bank. When the complainant did not get the vehicle he wrote to the Company who vide letter dated 17th May, 1989 replied that the factory had suspended operations from 7.2.1989 and advised the complainant to wait for the factory to reopen. THEreafter another letter was issued by the Company which is dated 5.12.1989 stating that the Company had been declared sick by the B.I.F.R. under the Sick Industrial Companies (Special Provisions) Act, 1985 and the Industrial Development Bank of India had been appointed as the Operating Agency on 9.2.1989 for the revival of the Company. THE grievance of the complainant was that the Company knew in December, 1988 that it was not in position to supply the vehicle and, therefore, ought not to have accepted the advance of Rs. 1,46,580.64 and as such the Company was guilty of unfair trade practice. THE grievance of the complainant against the bank was that the bank owed a duty to render proper service for which he had paid the necessary fees but as he could not get the delivery of the vehicle the Bank has rendered defective service and is, therefore, guilty of unfair trade practice. THE complaint was filed before the State Commission. THE State Commission dismissed the complaint but made observations against the Company in these terms "...we shall however make it clear that the first opposite party shall refund to the first complainant the sum of Rs. 1,64,580.64 with interest @ 18% per annum from the date of receipt till the date of repayment after the cessation of the moratorium". As against the Bank, the direction issued was as under : "...However'', the second opposite party will consider the case of the first complainant with liberality and defer taking coercive action for collection of loan till the moratorium ceases."

It is relevant to note that the B.I.F.R. had issued order under Section 22, Sub-section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 for a period of six months from 1.4.1991 till 30.9.1991 or till the finalisation of the rehabilitation scheme whichever is earlier. THE Hon''ble National Commission was of the view that when the scheme was under consideration and the B.I.F.R. had issued the necessary declaration which was in force at the time the complaint was entertained and disposed of, the State Commission could not take notice of the suspended contract nor could pass an order about the refund of the advance in anticipation of declaration of the BIFR coming to an end. Under Clause (b) of Sub-section 4 of Section .22 any right, privilege, obligations and liabilities accruing or arising there under before the said date, shall remain suspended or modified or shall be enforceable, shall become revived and enforceable only on the cessation of the declaration. Apart from this before the Hon''ble National Commission material had been placed regarding the subsequent development to the effect that the scheme for rehabilitation and modernization of the Sick Company had been prepared and sanctioned by the B.I.F.R. and a copy of the same had been filed before the Hon''ble National Commission. Taking note of the subsequent development in respect of the rehabilitation and modernization scheme the Hon''ble National Commission held that the Company cannot make the advance received from the first complainant except in accordance with the said scheme. In the instant case, there is no such material placed either before the District Forum or before us in appeal. It is not the case of the appellant that the B.I.F.R. had passed any order as envisaged under Section 22(3) of the Sick Industrial Companies (Special Provisions) Act, 1985. In this view of the matter, we are of the considered view that the aforesaid case of M/s. Standard Motor Products of India Ltd. (supra) is not applicable to the facts of the instant case before us. Apart from the said case, the learned Counsel for the appellant referred to the judgment of the Hon''ble Supreme Court in the case of Real Value Appliances Ltd. v. Canara Bank & Ors., reported in V (1998) SLT 220=II (1998) BC 357 (SC)=JT 1998 (3) (SC) 715, which is of no application to the facts of the instant case. The matter involved in the said case was between the Company which was declared as a sick Company and winding-up proceedings were pending before the Company Judge and a civil suit against the same Company was pending in the Hon''ble High Court. Apart from this the Hon''ble Apex Court was not considering the effect of the provisions of Section 22 of the SIC Act over the proceedings instituted under the provisions of Consumer Protection Act, 1986. Similarly in the case of Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd. & Anr., reported in JT 1993 (1) SC 310, the provisions of Sections 29 and 31 of the State Financial Corporation Act, 1951 were considered in respect of the Sick Company and it was held that "the action contemplated by Section 29 of the 1951 Act is undoubtedly a coercive measure directed at the take over of the management and property of the industrial concern and confers a further right on the Financial Corporation to transfer by way of lease or sale of properties of the said concern and any such transfer effected by the Financial Corporation would vest in the transferee all rights in or to the transferred property as if the transfer was made by the owner of the property. So also under the said provisions the Financial Corporation will have the same rights and powers with respect to the goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods. It is, therefore, obvious on a plain reading of Section 29 of the 1951 Act that it 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 security 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 proceedings under Sections 15 and 19 of the Sick Industrial Companies (Special Provisions) Act, 1985 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. We are, therefore, of the opinion that the word "proceedings'' in Section 22(1) cannot be given a narrow or restricted meaning to limit the same to legal proceedings. Such a narrow leaning would run counter to the scheme of the law and frustrate the very object and purpose of Section 22(1) of the 1985 Act". The Financial Corporation in the said case was governed by the State Financial Corporation and the proceedings under Section 29 of the SIC Act were held to be coercive in nature. In the instant case, the complaint filed by the respondent cannot be described to be coercive in nature. In view of the foregoing discussion, we are of the considered view that the District Forum was right in allowing the complaint and no interference is called for in the judgment/order passed in the appeal. Resultantly all the appeals are without merit and are dismissed. However in the peculiar circumstances of the case, the costs shall be borne by the parties. Appeals dismissed.