S and S Industries and Enterprises Ltd. vs Union of India (UOI) and Others

S.J. Mukhopadhaya, J.—By consent of learned Counsel appearing for the parties, the writ appeal is taken up for hearing.

The appellant-S and S Industries and Enterprises Ltd., preferred the writ petition in question, for a declaration that no proceedings for recovery of money or non-re-payment of trade or other dues and no order for payment or for enforcement of any security or guarantee against the appellant-company and its directors and officers, shall lie without prior consent of the BIFR, New Delhi.

The aforesaid prayer was made mainly on the ground that the appellant-company is a sick company, its revival is pending before the BIFR and no proceedings would lie against the appellant-company and its directors and officers, in view of the bar under the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

Learned senior counsel appearing for the appellant-company (writ petitioner) accepted that Section 22 of the said Act, may apply to the property(ies) of an "industrial company", but it does not preclude the authorities from investigating into the affairs of the company or from taking legal proceeding without touching the property(ies) of the "industrial company".

By order dated March 27, 2001, in Writ Petition No. 20854 of 2000 ( S and S Industrial and Enterprises Ltd. Vs. Union of India (UOI), ), the learned single judge, having noticed the aforesaid fact, held as follows (page 627):

In my view, so far as the petitioner-company is concerned, the provisions of Section 22 of the SICA would apply only against the industrial company or any of its properties. There is no dispute that the petitioner-company has approached the BIFR and the proceedings are pending before the BIFR. Further, the scope of Section 22 of the SICA is limited and the provisions of Section 22 would apply to the properties of the industrial company and the section does not preclude the authorities from investigating into the affairs of the company or from taking legal proceedings which would not in any way touch the properties of the industrial company. Therefore, the protection u/s 22 of the SICA would only be available against the properties of the industrial company from distraint or otherwise and there is no bar for the authorities to investigate and conclude the proceedings against the company for the non-payment of deposit amounts to the depositors.

In so far as directors and officers of the petitioner-company are concerned, I am unable to accept the submission of learned senior counsel for the petitioner. Firstly, they are not the petitioners in the writ petition and the writ petition is filed by the company. Secondly, the directors of the petitioner-company, by no stretch of imagination, can be regarded as guarantors of the petitioner-company. The officers of the company are employees, and they cannot also be regarded as guarantors. The directors occupy a fiduciary position vis-a-vis the company and they cannot be regarded as guarantors of the company or its properties. I therefore hold that the protection available u/s 22 of the SICA is not available to the directors and officers of the petitioner-company. I am of the view that the legislative intent is only to protect the properties of the company from any distraint proceedings, and the protection u/s 22 is not available to the directors and officers of the company.

As already observed, the directors of the company occupy a fiduciary position and they are not guarantors of the company or its properties. It is well-settled that company is a separate legal person distinct from its shareholders who have contributed share capital in the formation of the company. The directors may be the shareholders of the company, but the company is a separate legal person distinct from the directors. The submission of learned senior counsel that the company is run by and under the supervision of the directors and hence, the directors are also eligible to get protection u/s 22 of the SICA is not acceptable as the company is a separate legal person distinct from the directors and officers and if any violation takes place, it is open to the authorities to take action against the directors and officers of the company in accordance with the law.

We have heard learned Counsel appearing for the respective parties and noticed the findings of the learned single judge, relevant portion of which, has been quoted above. We find no ground made out to interfere with the aforesaid impugned order passed by the learned single judge.

Learned senior counsel appearing for the appellant-company submitted that the company''s authorised share capital is Rs. 15 crores, divided into 1.5 crores of equity shares of Rs. 10 each and the company has received public deposits and has been paying interest thereon. The total outstanding deposits as on October 31, 2000, was Rs. 931.47 lakhs, held by nearly 6,848 depositors and out of the said sum, a sum of Rs. 911.99 lakhs, held by 6,709 depositors had already been matured for payment as on October 31, 2000, but the same was not yet paid to various depositors.

Orally, it was prayed to allow the appellant-company to pay the matured amount in favour of the depositors.

In this regard, we may only mention that such prayer having not been made before the writ court and in the absence of specific pleading with regard to the different depositors made in writ petition/writ appeal, we are not inclined to deliberate on the same, as it is always open for the appellant-company to perform its duty in accordance with law.

The writ appeal is accordingly disposed of with the aforesaid observations. The interim order of stay is vacated. But in the facts and circumstances of the case, there shall be no order as to costs.