Special Leave Petition Civil No 14395 of 1989
From the Judgment and Order dated 1871989 of the Bombay High Court in WP No 6108 of 1987
VN Ganpule for the Petitioners
P Chidambram Mrs Raian Karaniawala NH Seerbai Karanjawala and Ravinder Kumar for the Respondents
The Judgment of the Court was delivered by K JAGANNATHA SHETTY J
The petitioners seek leave to appeal against the decision of the Bombay High Court in Writ Petition No 610887 quashing the proceedings for recovery of property tax and other expenses due from the first re spondent company
The matter arises in this way For the purpose of pre vention and revival of sick industries the Central Govern ment has enacted the Act called The Sick Industrial Compa nies Special Provisions Act 1985 968  The Act 
The Act extends to the whole of India including the State of Jammu  Kashmir
It came into force except sections 15 to 34 with effect from 15 May 1987
The Act covers only sick industrial companies or industrial compa nies which have the potential to become sick
The Act empow ers the Central Government to establish a Board to be known as the Board for Industrial  Financial Reconstruction to exercise the jurisdiction and powers and discharge the functions and duties imposed under the Act
The first respondent company Ms Shree Vallabh Glass Works Ltd has been declared to be a sick industrial company within the meaning of clause 0 of sub section 1 of Section 3 of the Act Sick Industrial Company  means an industrial company being a company registered for not less than seven years which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth and has also suffered cash losses in such financial year and the financial year immediately preceding such financial year
 The first petitioner is the Gram Panchayat Salwad and second petitioner is the Chairman of the Gram Panchayat
The petitioners initiated coercive proceedings under Section 129 of the Bombay Village Panchayat Act to recover a sum of Rs947539 stated to be the property tax and other amounts due from the company
Challenging that proceedings the Company moved the High Court by way of Writ Petition under Article 226 of the Constitution claiming protection provided under Section 22 of the Act
The High Court has accepted the writ petition and restrained the petitioners from recovering the said amount without the consent of the Board
The question is whether the Panchayat could not recover the amount due to it from out of the properties of the sick industrial company without the consent of the Board Section 22 provides as far as material as follows Section 22 Suspension of Legal Proceedings contracts etc 1 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 sanc tioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company 969 is pending then notwithstanding anything contained in the  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 shall lie or be proceeded with further except with the consent of the Board or as the case may be the Appellate Authority
222 to 224 xxx xxx xxx 225 In computing the period of limitation for the enforce ment of any right privilege obligation or liability the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be ex cluded
 Section 221 provides that in case the enquiry under Section 16 is pending or any scheme referred to under Sec tion 17 is under preparation or consideration by the Board or any appeal under Section 25 is pending then certain proceedings against the sick industrial company are to be suspended or presumed to be suspended The nature of the proceedings which are automatically suspended are 1 Winding up of the industrial company 2 Proceedings for execution distress or the like against the properties of sick industrial company and 3 Proceedings for the ap pointment of receiver
The proceedings in respect of these matters could however be continued against the sick indus trial company with the consent or approval of the Board or of the Appellate Authority as the case may be
Section 16 authorises the Board to make such enquiry as it may deem fit for determining whether any industrial company has become a sick industrial company
Where Board is satisfied that a company has become a sick industrial compa ny it could give a reasonable time to the company to make its net worth positive Sec
172
Where it is not prac ticable for sick industrial company to make its net worth positive within a reasonable time Section 173 steps in authorising the Board to direct any operating agency to prepare a scheme in relation to the company
The Board may specify the various measures to be considered by the operat ing agency
These measures are detailed out in Section 18
The operating agency has to prepare a scheme as per the order specified by the Board
970 In the instant case the Board by order dated 27 August 1987 has stated that it was satisfied that the company has become a sick industrial company
The Board directed that further proceedings under the Act shall be taken with re spect to the company
On the same day the Board after having heard the representatives of the ICICI the company the concerned Banks the other public financial institutions and the State Government of Gujarat considered the entire material on record held that it was not practicable for the company to make its net worth positive within a reasonable time and that further proceedings under sub section 3 of Section 17 of the Act are therefore to be taken
Accord ingly in exercise of the powers conferred under Section 173 of the Act the Board appointed the ICICI as the operating agency to prepare a scheme for rehabilitationrevival of the company keeping in view of the provisions of Sections 18 and 19 and the guidelines
At the same time the Board appointed Shri YV Sivaramakrishnayya as the special director of the company for safeguarding its financial andother interests
In the light of the steps taken by the Board under Sections 16 and 17 of the Act no proceedings for execution distress or the like proceedings against any of the proper ties of the company shall lie or be proceeded further except with the consent of the Board
Indeed there would be auto matic suspension of such proceedings against
the company s properties
As soon as the inquiry under Section 16 is ordered by the Board the various proceedings set out under sub section 1 of Section 22 would be deemed to have been suspended
It may be against the principles of equity if the credi tors are not allowed to recover their dues from the company but such creditors may approach the Board for permission to proceed against the company for the recovery of their duesoutstandingsoverdues or arrears by whatever name it is called
The Board at its discretion may accord its approval for proceeding against the company
If the approval is not granted the remedy is not extinguished
It is only post poned
Subsection 5 of Section 22 provides for exclusion of the period during which the remedy is suspended while computing the period of limitation for recovering the dues
In our opinion the High Court was justified in quashing the recovery proceedings taken against the properties of the company and we accordingly reject this petition with no order as to costs
PSS Petition dismissed


Summary:
The question for determination is can a licensee occu pying a flat in a tenant co partnership society be evicted therefrom under subsection 1 of section 91 of the Maha rashtra Cooperative Societies Act 1960 notwithstanding the protection extended by Section 15A of the Bombay Rents Hotels  Lodging House Rates Control Act 1947 as amended by Act XVII of 1973 or whether such proceedings would be gov erned by Section 28 of the Rent Act The appellant licensee was in actual possession of the fiat on 1st February 1973 under a license without the ex press permission of the Society
He was let in in 1957 by one DP Kejriwal who was looking after the flat originally allotted to one Laxmi Devi Kejriwal in 1949
She gifted her interest as allottee member to her brother who in turn transferred his interest therein to his brother Hari Kumar Sharma respondent No 2 in July 1967
Even after this transfer DP Kejriwal continued in management of the flat till 1979 when he received a letter from Respondent No 2 claiming ownership of the flat
The appellant thereafter filed an interpleader suit
On disposal of the said suit Respondent No 2 deposited a sum of Rs5500 with Respondent No 1 the Society towards the cost of the Society to initiate proceedings for eviction of the appellant from the flat in question under Section 911 of the Societies Act
The appellant contended that the proceeding under section 911 was not competent as the document of leave and licence in fact created a lease
Alternatively as he was in actual possession under a subsisting license right from 1957 to 1st February 1973 he was a statutory tenant under section 15A of Bombay Rent Act and the Cooperative Court had no juris diction under section 911 of the Societies Act and the proper court was one under section 28 of the Rent Act which the Respondent No 2 had in fact approached
863 The Co operative Court passed an ejectment order against the appellant
The appellant filed an appeal under section 97 of the Societies Act to the State Co operative Appellate Court Bombay
The appellate court dismissed the appeal and confirmed the order of the Co operative Court
Feeling aggrieved by the concurrent findings of the two courts the appellant preferred a Writ Petition in the High Court of Bombay
The Writ Petition was also dismissed
While allowing the appeal and setting aside the judg ments of all the Courts below and directing that the claim application filed under section 911 of the Societies Act shall stand dismissed this Court HELD The appellant was and is a protected tenant under section 15A of the Rent Act
The proceedings initiated under section 911 of the Societies Act cannot in the circum stances succeed as the Society has failed to prove the fact of trespass which constituted the foundation for jurisdic tion
if the society fails to prove that the appellant has no right to the occupation of the flat since he is a mere trespasser the suit must obviously fall
883B C The Societies Act section 911 confers jurisdiction on the Cooperative Court while section 28 of the Rent Act confers jurisdiction on the Court of Small Causes Bombay
881B The Status of a tenant is conferred on him by law as the legislature desired to extend the protection of the Rent Act to such licensees
Rights which do not flow from contracts but are conferred by law such as the Rent Act must be deter mined by the machinery if any provided by the law confer ring the right
881G H Notwithstanding the absence of privity of contract between the owner landlord and the licensee protected tenant the latter cannot be evicted except in accordance with the provisions of the Rent Act
882B Chandavarkar Sita Ratna Rao vs Ashalata section Gum am  at 478 Ramesh Himmatlal Shah vs Harsukh Jadhavji Joshi   Hindustan Petroleum Corpo ration Ltd vs Shyam Cooperative Housing Society  1989 SC 295 ON Bhatnagar vs Rukibai Narsim das   Ms AVR  Co  Ors
vs Fairfield Cooperative Housing Society  Ors   Sardar Mohan Singh Ahluwalia vs Maitrai Park Cooperative Housing Society  Anr   Hindustan Thompson Associ ates Ltd vs Mrs Maya Inderson Israni  Ors 864   Smt
Krishna Rajpal Bhatia vs Miss Leela H Advani  Ors   Deccan Merchant Cooperative Bank Ltd vs Pali Chand Jugraj Jain 1969 1 SCR 887 and Co operative Central Bank Ltd vs Additional Industrial Tribunal Andhra Pradesh  referred to