M/S Rites Ltd v. M/S Bihar Sponge Iron Ltd

S. RAVINDRA BHAT,J

SEPTEMBER 24, 2008

Page 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI + EX.P.2/2008 & EA 54/2008 M/S RITES LTD. ..... Decree Holder Through : Mr. Anil Seth, Advocate versus M/S BIHAR SPONGE IRON LTD. ..... Judgement Debtor Through : Mr. Rajiv Sawhney, Sr. Advocate with Ms. Malini Sud, Mr. Deepak Khurana, Mr. Kuber Dewan, Advocates CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT 1. Whether reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not? 3. Whether the judgment should be reported in the Digest? Mr. Justice S. Ravindra Bhat EA No.54/2008 1. Heard learned counsel for the parties. The decree holder seeks execution of a decree of this Court dated 19th January, 2005 for a sum of Rs.1,41,28,854/- along with interest. 2. The judgment debtor objects to maintainability of these proceedings through an application, EA 54/2008. The judgment debtor contends that the company was declared as a sick Industrial company under Sick Industries Page 2 Companies (Special Provisions) Act, 1985 (hereinafter referred to as the `SICA'), and that an operating agency was appointed. The applicant/judgment debtor has placed on record a summary record of proceedings of hearing and scheme sanctioned by the Board for Industrial and Financial Re-construction (BIFR), on 29.07.2004. The counsel for judgment debtor also contends that proceedings are still on and have not been terminated and as per the mandate of Section 22 the present execution is not maintainable. 3. Learned counsel for the decree holder contests the proposition of the judgment debtor. He relied upon the decision of the Supreme Court in Deputy Commercial Tax Officer and Others Vs. Corromandal Pharmaceuticals and Others, AIR 1997 Supreme Court 2027, and the decision of the learned Single Judge of this Court in U.P. State Spinning Co. Ltd. Vs. T .T . Limited & Anr. 141 (2007) DLT 83 and Cement Corporation of India Ltd. & Ors. Vs. M.P. Joseph, 111 (2004) DLT 120. It is therefore contended that so long as the debt in question is not included in the scheme or is not within the contemplation of the Board, the decree holder or the person entitled to execute the decree, is at liberty to seek its enforcement in accordance with law. 4. Counsel particularly relied on the fact that the scheme here was sanctioned before the decree was issued by this Court. He also submitted that the scheme, through para 16, states that liabilities not disclosed in the Page 3 rehabilitation scheme would be the personal responsibility of the promoters and met with by the Company. Similarly, reliance was placed on Clause 8.6 (xviii) to say that all current dues, arising after the date of scheme, would be the liability of the company. 5. Learned counsel for the judgment debtor, on the other hand contended that the plain words of Section 22 constitute a bar on the maintainability of the present suit, as far as the proceedings before BIFR are pending. He also submitted that in the Corromondel case, the only proposition which emerged that amounts like sales tax, etc. which the Sick Industrial Company is capable and obliged to collect after the date of the sanctioned scheme belonged to the Revenue. In the subsequent judgment of the Supreme Court in Tata Davy Ltd. v. State of Orissa and Ors., (1997) 6 SCC 669, in para 13 the court explained Corromondal as follows: "The Corromandal Pharmaceuticals judgment dealt with a sick industrial company which was unable to collect amounts like sales tax after the date of the sanctioned scheme. This Court said: "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 and could not have been intended to be covered within Section 22 of the Act." It added that the issue that had arisen before it had not arisen in the case of Vallabh Glass Works. It did not appear there from or from any other decision of this Co