C.R. No. 2217 of 2006 1 IN THE PUNJAB AND HARYANA HIGH COURT AT CHANDIGARH C.R. No. 2217 of 2006 Date of Decision : 18.1.2010 M/s Indian Sulphacid Industries Ltd., Upadhayay Marg, New Delhi .......... Petitioner Versus Radha & others ...... Respondents CORAM : HON'BLE MR. JUSTICE VINOD K. SHARMA Present : Mr. Mansur Ali, Advocate and Mr. H.S. Deol, Advocate for the petitioner. Mr. Gopal Sharma, Advocate for the respondents. **** VINOD K. SHARMA, J. (ORAL) The petitioner company has invoked the jurisdiction of this Court under Article 227 of the Constitution of India, to challenge the order dated 4.3.2006, passed by the learned Motor Accident Claims Tribunal, Rohtak (hereinafter referred to as “the Tribunal”) dismissing an application moved by the petitioner, under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as “the Act”). The learned Tribunal awarded compensation to the claimants, jointly and severally against the driver, and the petitioner, being owner of the Tata Sumo, which had met with an accident. In view of registration of the petitioner as sick Mill with the Board for Industrial and Financial Reconstruction, the petitioner sought stay C.R. No. 2217 of 2006 2 of execution proceedings by invoking Section 22 of the Act. Section 22 of the Act reads as under :- “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 sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 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 in 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. (2) Where the management of the sick industrial company is taken over or changed, in pursuance of any scheme sanctioned under section 18, notwithstanding anything contained in the Companies Act, 1956 or any other law or in the memorandum and articles of association of C.R. No. 2217 of 2006 3 such company or any instrument having effect under the said Act or other law-- (a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company; (b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board. (3) Where an inquiry under section 16 is pending or any scheme referred to in section 17 is under preparation or during the period of consideration of any scheme under section 18 or where any such such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board: Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however, that the total period shall not exceed seven years in the aggregate. C.R. No. 2217 of 2006 4 (4) Any declaration made under sub- section (3) with respect to a sick industrial company shall have effect notwithstanding anything contained in the Companies Act, 1956 or any other law, the memorandum and articles of association of the company or any instrument having effect under the said Act or other law or any agreement or any decree or order of a court, tribunal, officer or other authority or of any submission, settlement or standing order and accordingly,-- (a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating thereto pending before any court, tribunal, officer or other authority shall remain stayed or be continued subject to such declaration; and (b) on the declaration ceasing to have effect-- (i) any right, privilege, obligation or liability so remaining suspended or modified, shall become revived and enforceable as if the declaration had never been made; and (ii) any proceedings so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed. (5) In computing the period of limitation for the enforcement 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 excluded.” C.R. No. 2217 of 2006 5 The learned executing Court, dismissed the application moved by the petitioner, vide order dated 4.3.2006, the operative part of order passed by the learned executing Court reads as under :- “6. This argument does not appeal to me. Hon'ble Rajasthan High Court has clearly opined in M/s World Tax Limited and others Vs. State of Rajasthan and another reported in 2004(2) RCR (Crl) page 903 that the Section 22 creates embargo against the disposal of the assets of company for recovery of it's debts. This section does not bar the payment of money by the company or it's Director to other persons for satisfaction of their legal enforceable dues. This section does not create any legal impediment for institution and execution to recover the compensation awarded in accident cases. In the present case the company was held liable to pay Rs. 2,40,000/- to the claimants due to death of Jitender Singh. So, in these circumstances, the objections filed by JD No.02 are not maintainable and same is hereby dismissed.” The petitioner challenged the order passed by the learned Executing Court by way of this revision. This Court passed the following order on 8.5.2006:- “ Admitted. Keeping in view the fact that for the year ending 31.4.2005, the petitioner has earned an amount of Rs. 21.40 lacs and the net profit after depreciation and tax was Rs. 18.90 lacs, I do not find any ground to stay the execution of payment of the compensation amount to the respondent- C.R. No. 2217 of 2006 6 claimants payable on account of motor vehicular accident” In spite of the fact, that no stay was granted by this Court, the petitioner successfully evaded the execution of the award. When this case came up for hearing, an adjournment was sought by the respondent-decree-holder to seek permission of the Board to continue the execution proceedings. As per Section 22 of the Act, the proceedings against the sick company can continue with the permission of the Board. The learned counsel appearing on behalf of the respondents/ decree-holder points out, that the reference of the petitioner stands rejected by the Board, and the petitioner has preferred an appeal before the AAIFR Appellate Authority for Industrial & Financial Reconstruction (hereinafter called 'AAIFR') and the appeal filed is still pending. The application moved by the respondent-decree-holder, for permission to execute the decree of the learned Tribunal, has been taken on record, but the 'AAIFR' has not taken up the application, for hearing, in spite of request in this regard. The impugned order passed by the learned Executing court cannot be sustained, as there is a statutory bar to continue with the execution proceedings for recovery against a sick company, except with the permission of the Board. The impugned order is set aside, and the application moved by the petitioner under Section 22 of the Act, is allowed and the execution of award against the petitioner alone, is stayed. However, in view of the fact, that this Court had not stayed the C.R. No. 2217 of 2006 7 execution of the award, and the petitioner successfully evaded the payment. Directions are issued to 'AAIFR' to dispose of the application moved by the petitioner, for permission to execute the award, within three months from the date of receipt of certified copy of this order by taking a sympathetic view. The respondent /decree-holder is poor helpless widow and the minor children of the deceased, with no other source of livelihood, it will therefore be inhumane to delay the execution of award any further. The directions be complied with strictly. With the above observations, the revision is allowed, and the impugned order is set aside. 18.1.2010 ( VINOD K. SHARMA ) 'sp' JUDGE