Ashapura Proteins Pvt. Ltd. vs Gujarat State Financial Corpn. (Recovery Section)

Jayant Patel, J.—The matter is finally heard today.

The short facts of the case appear to be that the petitioner is the company registered under the provisions of the Companies Act, 1956 which had taken loan from the respondent-Corporation and as the payment was not made, the respondent-Corporation has initiated action for recovery of the amount. It is the case of the petitioner that the petitioner has approached before the Board for Industrial and Financial Reconstruction (hereinafter referred to as the ''BIFR'') and the proceedings are pending before the BIFR under the Sick Industrial Companies (Special Provision) Act, 1985 (hereinafter referred to as the ''SIC Act'').

Mr. Munshaw learned Counsel for the respondent-Corporation is not in a position to dispute the fact that as on the date, when the notice was issued by the Gujarat State Financial Corporation (hereinafter referred to as the ''G.S.F.C.''), which is impugned in the present petition, the proceedings before the BIFR, were pending. Therefore, once the proceedings are pending before the BIFR, the protection u/s 22 of the Act would be available and the power u/s 29 of the GSFC Act, could not be invoked by GSFC. The reference may be made to the decision of the Apex Court in case of Zenith Steel Tubes and Industries Ltd. and Another Vs. SICOM Limited, Wherein the conclusion inter alia recorded at paragraph Nos. 24 and 25 as under:

In the decisions of this Court cited before us, two divergent views have been expressed in respect of the same issue involved in this appeal. In the other decisions, this Court had no occasion to go into the said issue which involved the interpretation of the Section 22(1) of the SICA in respect of either proceedings or ''suits'' respectively. In Kailash Nath Agrawal''s case (supra) this Court has taken view that the legislature appears to have knowingly used tow different expressions in Section 22(1) of SICA, namely, ''proceeding'' in the first part and the expression ''suit'' in the second part and the protection of Section 22 extended to guarantors in respect of suits alone and the use of the expression ''proceeding'' could not be extended to include suits as well nor could the expression ''suit'' be extended to include the expression ''proceeding'' also. On the other hand, in Paramjeet Singh Pathejas case (supra) it was held that the expression ''suit'' which extends the protection of Section 22(1) to guarantors, would have to be interpreted to include ''proceeding'' also, in view of the intention of the legislature to protect sick industrial companies where references were pending before the BIFR. It is also evident from the decision in Paramjeet Singh Patheja''s case (supra) that the view expressed in Kailash Nath Agrawal''s case (supra) had not been brought to the notice of the learned Judges who decided the matter. Even if we are inclined to agree with one of the two interpretations, the anomalous situation will continue since the decisions are that of coordinate Benches.

In such circumstances, we consider it fit and proper that the matter should be referred to a larger Bench to resolve the existing anomaly resulting from the different views expressed in the two above-mentioned cases.

The matter is referred to the larger bench for exercise the scope of the Section 22 of the Act, as to whether, it would apply to only suits or also proceedings. Until the reference is pending before the BIFR, it would be just and proper to observe that powers u/s 29 of the Act may not be available to the respondent-Corporation.

However, the above referred preposition may not be in absolute sense available to the defaulter for the company, which is before the BIFR under the SIC Act. If BIFR grants permission for any action u/s 29 of the Act, the protection u/s 22 of the Act would not be available. It is an admitted position that in the present case neither respondent-Corporation has applied to the BIFR for such permission to take action u/s 29 of the SIC Act. Therefore, until such permission is granted, power u/s 29 of the Act by respondent-Corporation cannot be invoked. The impugned notice and the action of the respondent-Corporation as per Annexure-A is in purported exercise of the power u/s 29 of the Act and in view of the aforesaid observations, such cannot be permitted, until it is expressly so permitted by the BIFR, who is seized with the proceedings under the SIC Act.

Hence, impugned notice Annexure-A, so far as it relates to invoking the exercise of the power u/s 29 of the Act, is quashed and set aside with the observation that it will be open to the respondent-Corporation to approach before the BIFR, who is seized with the proceedings under the SIC Act. If the permission is granted by BIFR, the present order shall not operate as a bar, and it will be open to the respondent-Corporation to exercise power u/s 29 of the Act. At that stage rights and contentions of both the sides, shall remain open.

The petition is allowed to the aforesaid extent. Rule made absolute accordingly. No order as to cost.