1 dgm IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO.312 OF 2008 IN NOTICE OF MOTION NO.2599 OF 2007 IN SUIT NO.1474 OF 1980 The Cotton Corporation of India Limited. Appellants vs. Modi Spinning and Weaving Mills Company Limited. Respondents Mr.A.S.Khandeparkar along with Mr.U.M.Mahajan i/b.M/s.Divekar & Co. for the Appellants. Mr.H. Toor i/b.M/s.Crawford Bayley & Co. for the Respondents. CORAM : S.B.MHASE & R.V. MORE,JJ. DATE OF RESERVING THE ORDER : 4th September, 2008 DATE OF PRONOUNCING THE ORDER : 18th October 2008. P.C. Heard the learned counsel appearing for the respective parties. 2. The Appeal takes exception to the order dated 6.8.2007 passed by the learned Single Judge in Notice of Motion No.2599/2007 whereunder the Notice of Motion was made absolute in terms of prayers (a) and (b). 3. The Appellants are the original plaintiffs in Suit 2 No.1474/1980 filed on 16.08.1980 against the Respondents/original defendants for damages for the breach of contract amounting to Rs.62,17,970.62 with interest at the rate of 20% per annum from the date of the suit till judgment and further interest at the rate of 6% till payment. The Respondents/original defendants contested this Suit by filing written statement on 25.06.1981. The Suit appeared for hearing on 29.08.2003, 12.09.2003, 03.11.2003 and 24.11.2003. However, the Respondents/original defendants as well as their Advocate remained absent. Therefore on 08.06.2004 this Court directed the Office to issue notice to the Respondents and fixed the Suit for hearing on 6.7.2004. On 6.7.2004 the Respondents Advocate remained present. However, she informed the Court that she has no instructions in the matter. The learned Single Judge thereafter considered the documentary and oral evidence of the plaintiffs and passed the decree as prayed for. 4. The Respondents/original defendants thereafter took out Notice of Motion No.2599/2007 for setting aside the exparte decree dated 6.7.2004 and for restoration of the Suit to file. The Respondents also prayed that after restoration of the aforesaid Suit the proceedings of the Suit be suspended under Section 22 of The Sick Industrial Companies (Special Provisions) Act, 1985 (for short, "the SICA Act, 1985"). It was the contention of 3 the Respondents that it is sick company registered with Board of Industrial and Financial Reconstruction (BIFR) way back in the year 1989 and it was declared a sick industrial company. It was further contended that the first rehabilitation scheme of the Respondent-company was sanctioned by BIFR on 5.6.2000. The above scheme sanctioned by BIFR due to compelling reasons could not be fully implemented and was declared as failed. It was further contended that the Respondent-company submitted its revised scheme to the operative agency (IDBI) which was sanctioned by BIFR on 25.3.2004. BIFR had given a public notice in newspapers for objection/suggestion from any interested party with respect to sanctioning of the rehabilitation scheme of the company. However, the Appellants did not file their objection/suggestion before BIFR. In the aforesaid facts and in view of provisions of Section 22 of SICA Act, 1985 it was submitted that the Suit could not have been proceeded without prior approval of BIFR. So far as the delay is concerned, the Respondents submitted that on 25.2.2007 they came to know about the exparte decree dated 6.7.2004 and thereafter they applied for certified copy and filed an application for setting aside the exparte decree. 5. The Appellants contested the said Notice of Motion on several grounds and prayed for dismissal of the same. 4 6. By the order impugned in this Appeal, the learned Single Judge after hearing both the parties made the Notice of Motion absolute in terms of prayers (a) and (b). 7. Mr.Khandeparkar, the learned counsel for the Appellants submitted that Section 22 of SICA Act, 1985 does not have any application to the facts of the present case. He relied upon the decision of the Apex Court in Deputy Commissioner Tax Officer & ors. v. Deputy Commissioner Tax Officer & ors. v. Deputy Commissioner Tax Officer & ors. v. Corromandal Corromandal Corromandal Pharmaceuticals & ors., AIR 1997 SC 2027. Pharmaceuticals & ors., AIR 1997 SC 2027. Pharmaceuticals & ors., AIR 1997 SC 2027. 8. Per contra, Mr.Toor, the learned counsel for the Respondents, supported the impugned order. He relied upon the Apex Court decision in Gram Panchayat & Anr. Gram Panchayat & Anr. Gram Panchayat & Anr. v.v.v. Shree Vallabh Glass Works Limited & ors., (1990) 2 Shree Vallabh Glass Works Limited & ors., (1990) 2 Shree Vallabh Glass Works Limited & ors., (1990) 2 SCC SCC SCC 440 and in Tata Davy Ltd. vs. State of Orissa & 440 and in Tata Davy Ltd. vs. State of Orissa & 440 and in Tata Davy Ltd. vs. State of Orissa & ors., ors., ors., (1997) 6 SCC 669. (1997) 6 SCC 669. (1997) 6 SCC 669. 9. Having heard the learned counsel appearing for the respective parties and having gone through the impugned order along with the case law cited by the respective counsel, we are of the considered opinion that there is no merit in the Appeal. 10. Perusal of the order impugned in the Appeal reveals 5 that the exparte decree is set aside in view of provisions of Section 22 of SICA Act, 1985. The learned Single Judge recorded that the Scheme under the SICA Act, 1985 in respect of the Respondent-company was sanctioned anterior to the passing of the decree and thus Suit could not have proceeded further. 11. Mr.Khandeparkar, the learned counsel for the Appellants, relied upon the decision of the Apex Court in Corromandal Pharmaceutical’s case (supra) Corromandal Pharmaceutical’s case (supra) Corromandal Pharmaceutical’s case (supra) to contend that Section 22 of the SICA Act, 1985 has no application to the facts and circumstances of the present case. He relied upon the observation of the Apex Court in paragraph 10 and submitted that the provisions of Section 22(1) of the SICA Act can apply only to such of those dues reckoned or included in the sanctioned scheme and since the dues which the Appellants are entitled are not included in the sanctioned scheme of the Respondent-company, Section 22 of SICA Act has no application. 12. In Corromandal Pharmaceutical’s case (supra), the BIFR sanctioned a scheme under Section 18(4) read with Section 19(3) of the SICA Act after obtaining the consent of the concerned financial institution on 19.11.1990 and it was subsequently modified on 29.12.1993. Corromandal company, however, was an 6 assessee to sales tax under Andhra Pradesh General Sales Tax Act, 1957 and it was assessed for the assessment years 1992-93 by order dated 3.1.1994 and for the year 1993-94 by order passed in 1995. For the aforesaid two years, the sales tax arrears due from the Corromandal company was approximately Rs.9,53,833/-. Thus, the assessment orders were passed on 3.1.1994 and in 1995 long after the scheme was sanctioned by the BIFR on 19.11.1990. The argument of revenue was that the arrears of the sales tax in question relate to the period after the sanctioned scheme was brought under implementation and that the legal bar under Section 22 of the said Act is inapplicable since Section 22 of the Act can apply only in respect of the sales tax dues included in the sanctioned scheme. The Apex Court considered the ratio in Maharashtra Tubes Ltd. v. Maharashtra Tubes Ltd. v. Maharashtra Tubes Ltd. v. State State State Industrial and Investment Corporation of Industrial and Investment Corporation of Industrial and Investment Corporation of Maharashtra Maharashtra Maharashtra Ltd., (1993) 2 SCC 144 and Gram Panchayat v. Ltd., (1993) 2 SCC 144 and Gram Panchayat v. Ltd., (1993) 2 SCC 144 and Gram Panchayat v. Shree Shree Shree Vallabh Glass works Limited, (1990) 2 SCC 440 Vallabh Glass works Limited, (1990) 2 SCC 440 Vallabh Glass works Limited, (1990) 2 SCC 440 and held that the amounts like sales tax etc. which the sick industrial company is enabled to collect after the date of sanctioned scheme legitimately belonging to the Revenue, cannot be and could not have been intended to be covered within Section 22 of the said Act. Undisputedly in the present case, revised scheme was sanctioned by BIFR on 25.03.2004 much prior to the exparte decree. Therefore, in our considered opinion, 7 the ratio of the Apex Court in Corromandal Pharmaceutical’s case (supra) cannot be made applicable to the facts and circumstances of the present case. 13. In Shree Vallabh Glass Works Limited (supra), Shree Vallabh Glass Works Limited (supra), Shree Vallabh Glass Works Limited (supra), the company is declared a sick industrial company under Section 3(1)(o) and steps were taken under Sections 16 and 17 by the Board. The Apex Court held that in these circumstances, all proceedings for execution, distress or the like against any of the properties of the company would be automatically suspended and could not be taken without consent of the Board. The above ratio of the Apex Court was followed in Maharashtra Tubes Limited Maharashtra Tubes Limited Maharashtra Tubes Limited (supra). (supra). (supra). The Apex Court in this case also held that "Where an inquiry is pending under Sections 16/17 or an appeal is pending under Section 25 of the 1985 Act there should be cessation of the coercive activities of the type mentioned in Section 22(1) to permit the BIFR to consider what remedial measures it should take with respect to the sick industrial company." In our opinion, above ratio is squarely applicable to the present facts and circumstances of the case. 14. The Apex Court had an occasion to consider the ratio in Corromandal Pharmaceutical’s case in Tata Davy Limited v. State of Orissa & ors. (1997) 6 SCC 669. In paragraph 13, the Apex Court observed as follows: 8 "13. The Corromandal Pharmaceuticals judgment dealt with a sick industrial company which was enabled 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 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 therefrom or from any other decision of this Court or of the High Courts "that in any one of them, the liability of the sick company dealt with therein itself arose, for the first time after the date of sanctioned scheme. At any rate, in none of those cases, a situation arose whereby the sick industrial unit was enabled to collect tax due to the Revenue from the customers after the ‘sanctioned scheme’ but the sick unit simply folded its hands and declined to pay it over to the Revenue, for which proceedings for recovery had to be taken. Clearly, the facts in the Corromandal Pharmaceuticals case differ from the facts of the Vallabh Glass Works case and those before us. The reference to the Corromandal Pharmaceuticals case is, therefore, inapposite." 15. The above observation makes it clear that the Apex Court has made distinction in liability of the sick company which has arisen prior to and subsequent to the sanction of the scheme by BIFR. In the present case, admittedly the revised scheme was sanctioned prior to the exparte decree and, therefore, in our considered view, Section 22 of SICA Act, 1985 is clearly applicable in the present facts and circumstances of the case. The learned Single Judge rightly concluded that the proceedings of the Suit could not have been proceeded 9 with when the Scheme was sanctioned anterior to exparte decree. We do not see any reason which enable us to interfere in the impugned order. The Appeal is devoid of any substance and the same is therefore dismissed with no order as to costs. [R.V.MORE,J.] [R.V.MORE,J.] [R.V.MORE,J.] [S.B. [S.B. [S.B. MHASE, J.] MHASE, J.] MHASE, J.]