Case: Shree Sajjan Mills Ltd. &amp; Others Vs. Municipal Corporation, Ratlam

The petitioner herein applied to the Board of Industrial and Finance Reconstruction (BIFR) under the Sick, Industrial Companies (Special Provisions) Act, 1985, hereinafter referred to as `SICA for being registered as a sick company and it was so registered on 21st November, 1989. It appears that a recommendation was made by the BIFR for winding up of the company, but in appeal before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR), a scheme for revival of the company was framed on 29th November, 1995. Pursuant to the scheme, an Assets Sale Committee was constituted which invited tenders for sale of surplus land belonging to the appellant company. Thealso participated in the auction and was found to be the highest bidder in respect of the plots tendered for sale. Under the terms and conditions of the sale, the highest bidder was required to deposit 20% of the purchase price within thirty days from the date of the auction and the remaining balance in two subsequent stages. At the very initial stage, the Corporation failed to deposit 20% of the purchase price within the stipulated time and, accordingly, the aforesaid Committee cancelled the offer and forfeited the earnest money which had been deposited by the Corporation for participating in the auction. Such cancellation and forfeiture was effected as far back as inin 2001, the Corporation filed a Suit for recovery of the earnest money. Before the Civil Court, an application was filed by the appellantCompany under Sections 9 and 151 of the Code of Civil Procedure read with Section 26 of `SICA objecting to the jurisdiction of the court to entertain the suit. The application was considered by the learned District Judge, Ratlam, Madhya Pradesh, before whom the suit was pending. Accepting the submissions made on behalf of the Corporation, the learned District Judge came to the finding that in view of Section 26 of SICA, the Civil Court had no jurisdiction to try any suit relating to sick units against the proceedings of the Board and was of the view that the Plaint should be returned to the plaintiff under Order 7 Rule 10 CPC. However, on the request made on behalf of the plaintiff, an order was made for return of the plaint for presentation before the appropriate forum, including the Board, under the provisions of Order VII Ruled by the order of the learned District Judge, dated 31 st August, 2004, the respondent Corporation filed Misc.Appeal No.2275/2004. The High Court considered the effect of Section 26 of the Sick Industrial Companies (Special Provisions) Act, 1985 and held that the transaction between the Corporation and the Company was outside the purview both of the BIFR and the AAIFR, and that the same did not affect the implementation of the scheme. The High Court, accordingly, allowed the appeal and set aside the order of the learned District Judge and remanded the same to the learned District Judge to dispose of the suit onsaid order of the High Court has been challenged in the present Special Leave Petition.

Reasoning:
Having considered the submissions made on behalf of the respective parties, we are unable to agree with Ms.Rao that the forfeiture of the earnest money in respect of the sale transaction was part of the process for implementation of the scheme as such. The provisions of Sections 15 to 19 of the SICA provide for the BIFR to frame a scheme for revival of the company declared sick and, in that connection, it has authority to decide all matters with regard to such aagree with the view expressed by the High Court that the forfeiture of the earnest money by the Assets Sale Committee could not have been the subject matter of a dispute within the meaning of Section 26 which either BIFR or AAIFR has the jurisdiction to determine.