AI Structured Summary
Not yet generated for this judgment
Judgment
The petitioner is the defendant in the suit O.S.77/96 on the file of the V Additional Judge, C.C.C., Hyderabad. The respondent-plaintiff filed the suit for recovery of Rs.3,25,692.50 from the petitioner. The petitioner was set ex-parte and the suit was decreed on 2.9.1993. The respondent filed execution petition E.P.65/93. In the execution proceedings the petitioner paid a sum of Rs. 1,60,000/- towards part satisfaction of the decretal amount of Rs. 8,91,194/-. The petitioner''s application I.A. 1177/93 filed under Order 9 Rule 13 CPC to set aside the ex-parte decree, was allowed on 4,7.1996 and the ex parte decree was set aside. Threafter, the petitioner filed the present applications, I.A.717/95 seeking restitution and for directing the respondent to pay back the amount of Rs. 1,60,000/-, which was paid by the petitioner subsequent to passing of the ex-parte decree. The Court below, however, dismissed the application on the ground that the respondent-Company was declared as sick and that Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short ''the Act'') prohibits execution against the properly of a sick Company. This order is challenged in this C.RP.
It is contended by the learned Counsel for the petitioner that Section 22 of the Act has application only to execution or for recovery against the properties of the company and that the amounts, having been paid by the petitioner, has to be restituted, since the ex parte decree has been set aside.
Learned Counsel for the respondent, however, submits that the proceedings u/s 144 of CPC being substantially in the nature of suit, such proceedings cannot be taken against the respondent company, in view of Section 22 of the Act.
The short and interesting question that arises in this C.R.P. is whether a direction for payment of the amount in restitution u/s 144 C.P.C., of the amount paid by the petitioner can be given against the respondent, a sick company?
Section 22 of the Act is relevant for our purpose, which reads as follows:
"22. Suspension of Legal Proceedings, Contracts, Etc., :-(1) Where in respect of an industrial company, an inquiry u/s 16 is pending or any scheme referred to u/s 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal u/s 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 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 shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority."
It is clear from a reading of this provision that no proceedings for execution against any of the properties of the sick industry and no suit for reovery of money against such a company shall lie except with the consent of the Board. What is important to be noticed is that no proceedings can be taken in the nature of execution or distress or a suit be filed against the properties of the company of for recovery of the money belonging to the company. The section, threfore, contemplates that pending decision by the Board in the inquiry under Sec. 16 of the Act, the property of the Company should be kept intact until a proper scheme is framed. In the instant case the amount that is sought to be restituted or sought to be paid by the company, is the amount that has been paid by the petitioner in execution of the ex parte decree. Now that ex parte decree has been set aside, the question is. whether the respondent should keep the money ? Section 144 C.P.C. provides that where a decree or an order is varied or reversed or set aside, the Court which passed the decree or order shall on the application of any party cause restitution to be made, placing the parties in the position which they would have occupied but for such decree or order. Restitution is based on the doctrine "actus curiae neminem gravabit" that is act of the Court should do no harm to a litigant. It is the highest duty of all courts to see that the act of the Court does no injury to the suitors. The main idea is to place the parties in the same position as they were before the order, which was varied or set aside later, was passed. It should therefore follow that any benefit derived by a party should be restored to the other party. Since the amount of Rs.1,60,000/- was paid by the petitioner in execution of the decree which is now set aside, the Court shall cause restitution of the benefit, that is, order return of the amount to the petitioner. Section 22 of the Act can have or could not have intended to have any application to cases of the above nature, since the amount belongs to the petitioner and Section 22 of the Act prohibits execution only against the property of the company or suit for recovery of money of the Company.
It is contended by the learned Counsel for the respondent that sub-section (2) of Section 144 C.P.C. provides clearly that application for restitution is in the nature of suit. It cannot lie against a sick company as Section 22 of the Act places an embargo for filing any suit against a sick company for the recovery of money.
Proceedings u/s 144 C.P.C. no doubt are in the nature of a suit. But the basic fact to be borne in mind is that the suit or proceedings is being only against the property of the petitioner, Section 22 of the Act cannot have any application. Courts have held that Section 22 should be liberally construed and that money received by the Company to be paid to the Government or to any authority can be recovered from the Company. In Deputy Commercial Tax Officer and Others Vs. Corromandal Pharmaceuticals and Others, it was held that suit for recovery of sales tax against a sick company was not barred. The Court observed as follows:
".....So, though the language of Section 22 is of wide import regarding suspension of legal proceedings from the moment an inquiry is started, till after the implementation of the scheme or the disposal of an appeal u/s 25 it will be reasonable to hold that the bar or embargo envisage in Section 22 (1) can apply only to such of those dues reckoned or included in the sanctioned scheme. Such amounts like sales tax, etc., which the sick industrial company is enabled to collect after the date of the sanctioned scheme legitimately belonging to the Revenue, cannot be and could not have been intended to be covered within Section 22 of the Act. Any other construction will be unreasonable and unfair and will lead to a state of affairs enabling the sick industrial unit to collect amounts due to the Revenue and withho1d it indenfinitely and unreasonably. Such a construction which is unfair, unreasonable and against spirit of the statue in a business sense, should be avoided."
Again in Amitabh Textiles Mills Ltd., Dehradun and another Vs. U.P. State Electricity Board, Dehradun and another, , proceedings for the recovery of dues from the company were taken against the Company by the U.P.S.E. Board. The contention that those proceedings cannot continue in view of Section 22 of the Act, was held untenable, following the decision in Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras, , where it was held that default in payment of arrears of rent can be recovered from the sick company and the argument that the company was not liable to pay the rent as it has been declared as a sick company was rejected.
In view of the above decisions it is clear that there is no total embargo against the sick company, for taking proceedings for the recovery of money, as contended by the learned Counsel for the respondent. Thus, the petitioner is entitled to recover the money from the respondent company since the embargo placed by Section 22 of the Act does not cover the restoration of the money received by the respondent Company, to the petitioner. The Court below, thinking that there was total embargo in view of Sec.22 of the Act, refused to exercise jurisdiction vested in it u/s 144 C.P.C. Sec.144 C.P.C. commands the Court to direct restoration of the benefit to the petitioner. Thus the impugned order suffers from an error of jurisdiction and has to be set aside and the petitioner''s application ought to have been allowed.
The C.R.P. is, therefore, allowed and the impugned order is set aside. I.A. No.717/95 is allowed. The respondent to pay costs of Rs. 1000/- (Rupees one thousand only)