TODAYS WRITING PRODUCTS LTD. AND ORS. Vs. THE ROYAL BANK OF SCOTLAND N.V.
LAWS(DR)-2014-5-5
DEBTS RECOVERY APPELLATE TRIBUNAL
Decided on May 06,2014

Todays Writing Products Ltd. And Ors. Appellant
VERSUS
The Royal Bank Of Scotland N.V. Respondents

JUDGEMENT

Ranjit Singh, J. (Chairperson) - (1.) THE application filed by the appellants for stay of the proceedings in the O.A. on the ground that the appellant company had become sick industrial company has been declined. Against this order, the appellants have filed the present appeal. The appellants had obtained certain credit facilities from the respondent Bank to the tune of Rs. 10 crores. Appellant No. 2 had stood as guarantor. The credit facilities were recalled on 26.3.2009 and thereafter the Bank instituted this O.A. for the recovery of Rs. 10,69,85.821/ - with interest @ 20% p.a. with monthly rests and costs.
(2.) THE appellants appeared before the Tribunal below and filed written statement. During the pendency of the O.A., the present application was filed for staying the proceedings in the O.A. under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, the SICA) on account of the company/being declared sick. The Tribunal after hearing the Counsel for the parties, declined the prayer made in the application which is now impugned through the present appeal. The notice in the appeal was issued and reply has been filed. It was observed by this Tribunal in its order dated 30.12.2013, that a short legal question that would arise in this case is whether or not the provisions of Section 22 of SICA are applicable to the O.A. proceedings pending before the DRT. As per the Counsel for the appellants there has to be an automatic suspension of all legal proceedings including suit for recovery of money where Section 22(1) of the SICA is attracted. In support of this, the Counsel has placed before me a judgment in the case of LML Ltd. v. Sunil Mittal, : III (2013) BC 694 (DB) : 200 (2013) DLT 398 (DB) : 2013(2) DRTC 660 (DB) (Delhi). The Court in this case was dealing with a suit filed for recovery of principal amount and interest. The company had been registered as sick company before BIFR and in this context the Division Bench of the Delhi High Court has considered the question whether in view of afore -noted scenario, where the company was declared as sick company by BIFR, could the suit filed by the respondent therein seeking recovery of money be proceeded with in the absence of permission from BIFR. Under Section 22 of SICA, no proceedings of execution, distress or the like against any of the properties of the industrial company shall lie or be proceeded with further, except with the consent of the Board. Section 22 of SICA reads as under : "22. Suspension of Legal Proceedings, Contracts, etc. -(1) Where in respect of an Industrial Company an inquiry under Section 15 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 (1 of 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 proper -ties 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."
(3.) THE Division Bench has made a reference to a judgment of the Apex Court in the case of Raheja Universal Ltd. v. NRC Limited, : I (2012) CLT 250 (SC) : I (2012) BC 686 (SC) : II (2012) SLT 113 : (2012) CLT 250, where this issue was examined. The Division Bench of the Delhi High Court found that this issue was no more res Integra. The observation of the Apex Court in the Reheja's case are noted which are as under : "The said provision, thus mandates that no proceeding inter alia for exaction, distress or the like against any of the properties of the Industrial Company and no suit for recovery of money or for the enforcement of any security, shall lie or be proceeded with further, except with the consent of the Board or as the case may be the Appellate Authority. The said statutory injunction will operate when an inquiry had been initiated under Section 16 or a scheme referred to under Section 178 is under preparation and/or inter alia a sanctioned scheme is under implementation. It is not disputed before us that the amount awarded in favour of the respondent by the Counsel finds specific mention in the sanctioned scheme which is under implementation." It is, therefore, held that where an amount claimed or the liability sought to be set up is covered under scheme, Section 22(1) will be attracted and there would be an automatic suspension of all legal proceedings including a suit for recovery of money.;


Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.