Judgment:
J.R. Vora, J.
1.The only controversy emerges in the matter :
Whether the arrears of rent due to the landlords would come within the sweep of Sec. 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 or not?
2. Few facts of the matter are - the present respondents being landlords filed a Civil Suit in the Small Causes Court at Ahmedabad being HRP Suit No. 875 of 1997 for the eviction of rented premises against the present applicant which is a Company incorporated under the Indian Companies Act. In the above suit, the plaintiffs i.e. present opponents filed an Application at Exh. 37 under Sec. 11(4) of the Bombay Rent Act for directing the tenant - present applicant to deposit the amount of the arrears of rent from 1st April, 1997 upto the date it had fallen due, amounting to Rs. 1,01,250/and that directing the tenant to deposit Rs. 6,750/- regularly in each month for use and occupation of the rented premises. This application was vehemently opposed by the present applicant - original defendant on the ground that the defendant was a company and as a sick unit had filed a Reference to the BIFR under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. The said Reference was registered as Case No. 99 of 1997 and BIFR proposed to make an enquiry under Sec. 16 of the said Act. It was also the contention of the defendant that according to Sec. 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, no suit for the recovery of money can be filedor proceeded with against the present defendant. TheTrial Court upheld the contention of the defendant andheld that a Reference to the BIFR was made and enquirywas contemplated and, therefore, Sec. 22(1) of the SickIndustrial Companies (Special Provisions) Act, 1985 wasattracted, which creates bar against the recovery ofmoney of the arrears of rent also and, therefore, thecourt below dismissed the application of the landlords.
3. Being aggrieved, the plaintiffs - presentopponents filed a Revision Application being CivilRevision Application No. 15 of 1999 before the AppellateBench of the Small Causes Court at Ahmedabad. Whilesetting aside the reasoning of the Small Causes Court,Ahmedabad, the Appellate Bench of the Small Causes Courtcame to believe after relying on the decision of theHon'ble Supreme Court in the matter of SHREE CHAMUNDIMOPEDS LIMITED vs. CHURCH OF SOUTH INDIA TRUSTASSOCIATION, MADRAS, reported in AIR 1992 SC 1439 thatthe proceeding of eviction instituted by the landlordagainst the tenant is not covered under Sec. 22(1) ofthe Act. Further, the Appellate Bench of the SmallCauses Court while replying the argument on behalf of thethen opponent - the present applicant in respect of theAmendment in 1994 in Sec. 22(1) of the Sick IndustrialCompanies (Special Provisions) Act, 1985, that thewording 'no suit for the recovery of money' go with thelatter part of the amendment and relates only to theliability arising out of the enforcement of any securityagainst the industrial company.Ultimately, theAppellate Bench of the Small Causes Court at Ahmedabadheld that the present recovery of arrears of rent wouldnot be barred under Sec. 22(1) of the Sick IndustrialCompanies (Special Provisions) Act, 1985 and hence theAppellate Bench allowed the Application at Exh. 37.Since there was no evidence to fix interim rent less thanthe agreed rent of Rs. 6,750/- the Appellate Bench heldthat Rs. 6,750/- was the interim rent and directed thetenant to pay the arrears of Rs. 1,01,250/- and todeposit Rs. 6,750/- per month as interim rent in theCourt.
4. Being aggrieved, this Revision Application isfiled by the original defendants i.e. tenant company.
5. Learned counsel Mr. A.K. Clerk on behalf of theapplicant and learned counsel Mr.U.D. Shukla who appearson Caveat on behalf of the landlords were heard atlength.
6. Mr. Abilash Clerk put much stress on the wording'No suit for the recovery of money' employed in Sec.22(1) of the Sick Industrial Companies (SpecialProvisions) Act, 1985. Mr. Clerk invited the attentionof the Court on Exh. 37 and the relief asked for. Mr.Clerk contended from the relief asked for that the reliefpertains only for the recovery of the money and the wholeproceeding for recovery of money of whatever nature isrequired to be suspended against the sick unit as soon asthe Reference is filed under Section 15 of the SickIndustrial Companies (Special Provisions) Act, 1985. Mr.Clerk contended that the trial court has rightly heldthat the application was filed purely for the recovery ofmoney and since the unit has filed a Reference under Sec.15 of the Sick Industrial Companies (Special Provisions)Act, 1985, as per Sec. 22(1), this recovery is barred.Learned Counsel Mr. Clerk contended that the AppellateBench of the Small Causes Court, however, has given verynarrow meaning to the phrase 'no suit for the recovery ofmoney' employed in the Sec. 22(1) of the Sick IndustrialCompanies (Special Provisions) Act, 1985. Mr.Clerkcontended that the widest possible meaning must be givento the phrase and attributing that meaning to the phrase,it clearly includes within its scope any proceeding forthe recovery of money including the proceedings for therecovery of the arrears of rent. Mr.Clerk relied uponthe decision of the Hon'ble Supreme Court in the case ofREAL VALUE APPLIANCES LIMITED vs. CANARA BANK, reportedin (1998) 5 SCC 554. Attention of the court is alsodrawn to para 23 of the decision and it is contended thatas soon as the reference is filed, Section 22(1) comesinto operation. However, in the revision application,this contention is not controverted by the other side andit is admitted that the Reference is filed and on filingof the Reference, Section 22(1) of the Sick IndustrialCompanies (Special Provisions) Act, 1985 is attracted.Mr. Clerk also relied on the decision of the Apex Courtin the matter of GRAM PANCHAYAT vs. SHREE VALLABH GLASSWORKS LTD., reported in AIR 1990 SC 1017, wherein theApex Court has pronounced that it may be against theprinciples of equity if the creditors are not allowed torecover their dues from the company, but such creditorsmay approach the Board for permission to proceed againstthe Company for the recovery of their dues outstandingoverdues or arrears by whatever name it is called. Mr.Clerk contended that therefore any dues and whatever nameit is called, are barred under Sec. 22(1) of the SickIndustrial Companies (Special Provisions) Act, 1985. Mr.Clerk also relied on the decision of the Supreme Court inthe case of MAHARASHTRA TUBES LIMITED vs. STATEINDUSTRIAL & INVESTMENT CORPORATION OF MAHARASHTRA LTD.,reported in 1993 (2) SCC 144 wherein the Supreme Courthas given very wide meaning to words 'proceedings' and'or the like'. The Supreme Court has further observed inthe decision that the expression `proceedings' in Sec.22(1) must be widely construed. It cannot be confined tolegal proceedings understood in the narrow sense ofproceedings in a court of law or a legal tribunal forattachment of sale of the debtor's property,notwithstanding the use of that expression in themarginal code. Mr. Clark contended that if thisrecovery of money is allowed, the same will defeat theprovision of Sec. 22(1) of the Sick Industrial Companies(Special Provisions) Act, 1985 and that the liability topay rent is not extinguished by operation of Sec. 22(1) of the said Act, but it is only time being suspended.Mr. Clerk further contended that the Appellate Bench ofthe Small Causes Court in para 14 of its judgment hasgiven very narrow interpretation of the phrase 'no suitfor the recovery of money' to be construed as to be thesuits relating in respect of the matters referred to inthe latter part of the Section, which is against thespirit of the decision of the Apex Court in the case ofMaharashtra Tubes Ltd (Supra) and, therefore, Mr. Clerkargued that the matter be admitted and the interim reliefargued that the matter be admitted and the interim reliefbe granted.
7. Learned Counsel Mr. U.D. Shukla on behalf ofthe Opponents has contended that the interpretation ofthe section by the Appellate Bench of the Small CausesCourt is correct. Mr. Shukla has argued that thesection is in two parts and the latter part which startwith the phrase 'No suit for the recovery of money'. Hefurther contended that no suit for the recovery of moneyqualifies the phrase for the enforcement of any securityagainst the industrial company and qualifies the phraseof any guarantee in respect of any loans or advancegranted to the industria company. He further argued thatthe landlord and tenant are bound by contract of tenancybetween them and that contract is not suspended as persub-sec (3) of Sec. 22 of the Sick Industrial Companies(Special Provisions) Act, 1985. If the blanket meaningis given to the Sec. 22(1) of the Sick IndustrialCompanies (Special Provisions) Act, 1985, then, sub-sec.(3) shall become redundant and, therefore, the suit forthe recovery of the arrears of rent would not be coveredunder Sec. 22(1) of the Sick Industrial Companies(Special Provisions) Act, 1985. Mr. Shukla relied onthe decision of the Apex Court in the matter of DEPUTYCOMMERCIAL TAX OFFICER vs. COROMANDEL PHARMACEUTICALS,reported in AIR 1997 SC 2027, wherein the Apex Court hasheld that the bar under Sec. 22(1) applies only to suchof those dues reckoned or included in sanctioned schemefor rehabilitation and in that case, the Sales Tax duesrecovered by the sick company after the sanctioning ofthe scheme were held to be recoverable. Mr. Shukla alsorelied on the decision of the Hon'ble Supreme Court inthe matter of SHREE CHAMUNDI MOPEDS LIMITED vs. CHURCHOF SOUTH INDIA TRUST ASSOCIATION, reported in AIR 1992 SC1439, wherein the Apex Court held that the evictionproceedings not covered under Sec. 22(1) of the SickIndustrial Companies (Special Provisions) Act, 1985 andthat the leasehold right of a sick company cannot beregarded as property of the company for the purpose ofsub-sec. (1) of Sec. 22 of the Sick IndustrialCompanies (Special Provisions) Act, 1985.
8. In the premises of the aforesaid contentions onbehalf of the learned counsels for the parties, thecrucial question arises whether recovery of the arrearsof rent in a suit for eviction by landlord would bebarred in view of Section 22(1) of the Sick IndustrialCompanies (Special Provisions) Act, 1985.
9. First we have to examine the status andthe nature of the arrears which are sought to berecovered. Admittedly, relationship between the partiesare of the landlord and tenant and the recovery which issought is the arrears of rent. It may also be mentionedthat this contractual relationships are restricted andprotected by various rent legislations. Rentlegislations have protected the interest of tenantagainst eviction, at the same time, what is guaranteed tothe landlord is the due compensation for the use andoccupation of the premises. While interpreting anystatute with reference to the relation of the landlordand tenant, this prime object is required to be kept inmind. Therefore, what is sought to be recovered is thecompensation for the use and occupation of the premiseswhich is let out to the present applicant. Incidentally,the present applicant happens to be a companyincorporated under the Indian Companies Act and a legalperson which gone sick and had asked protection underSick Industrial Companies (Special Provisions) Act, 1985.If the applicant is not a legal person and a company, thequestion which has arisen would not have arisen at all.
10. Now, Section 22(1) of the Sick IndustrialCompanies (Special Provisions) Act, 1985 reads as under :
'22(1) Where in respect of an industrial company, an inquiry under Section 16 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 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 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.'
11. The wordings 'no suit for the recovery of money.............. to the industrial company' are added inthe Section by way of an amendment in the year 1994 byAct 12 of 1994 by virtue of Section 12 of that Act.
12. The purpose and the object behind such provisionis to ensure that a proceeding having an effect on theworking or the finances of a sick industrial companyshall not be instituted or continued during the periodthe matter is under consideration before the Board or theAppellate Authority or a sanctioned scheme is underimplementation without the consent of the Board or theAppellate Authority. These provisions are made with aview to securing the timely detection of sick andpotentially sick companies owning industrialundertakings, the speedy determination by a Board ofexperts of the preventive, ameliorative, remedial andother measures which need to be taken with respect tosuch companies and the expeditious enforcement of themeasures so determined. Therefore, these provisions aremade to save assets and the property of the sick companyand to render assistance and help till Board and/orAppellate Authority finalise the proceedings.
13. The Hon'ble Apex Court in the matter of ShreeChamundi Mopeds Ltd., (supra) has specifically observedthat the leasehold interest of a company in questionwhich is in occupation of the premises as a statutorytenant by virtue of protection conferred by KarnatakaRent Control Act cannot be regarded as property of the company for the purpose of sub-sec. (1) of Sec. 22 ofthe Act and for that reason also the provisions of Sec.22(1) were not attracted to the eviction proceedings.Now according to the Apex Court, the leasehold interestof the company is not a property of the company. Whenthis decision was pronounced by the Apex Court, the abovementioned amendment in Sec.22(1) was not there. ApexCourt observed there that following proceedings wereautomatically suspended under Sec. 22(1) of the Act.These categories are :-
(i) Proceedings for winding up of the industrial company.
(ii) Proceedings for execution, distress or the like against the properties of the sick industrial company, and
(iii) Proceedings for the appointment of Receiver.
Apex Court then observed as under in para-12 of thejudgment :-
'Eviction proceedings initiated by a landlord against a tenant company would not fall in categories (1) and (3) referred to above. The question is whether they fall in category (2). It has been urged by the learned counsel for the appellant company that such proceedings fall in category (2) since they are proceedings against the property of the sick industrial company. The submission is that the leasehold right of the appellant-company in the premises leased out to it is property and since the eviction proceedings would result in the appellant-company being deprived of the said property, the said proceedings would be covered by category (2). We are unable to agree. The second category contemplates proceedings for execution, distress or the like against any other properties of the industrial company. The words `or the like' have to be construed with reference to the preceding words, namely, `for execution, distress' which means that the proceedings which are contemplated in this category are proceedings whereby recovery of dues is sought to be made by way of execution, distress or similar process against the property of the company.Proceedings for eviction instituted by a landlord against a tenant who happens to be a sick industrial company, cannot in our opinion, be regarded as falling in this category. We may, in this context, point out that, as indicated in the Preamble, the Act has been enacted to make special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, they speedy determination by a Board of experts of the preventive, ameliorative, remedial and and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined. The provision regarding suspension of legal proceedings contained in Section 22(1) seeks to advance the object of the Act by ensuring that a proceeding having an effect on the working or the finances of a sick industrial company shall not be instituted or continued during the period the matter is under consideration before the Board or the Appellate Authority or a sanctioned scheme is under implementation without the consent of the Board or the Appellate Authority. It could not be the intention of Parliament in enacting the said provision to aggravate the financial difficulties of a sick industrial company while the said matters were pending before the Board of the Appellate Authority by enabling a sick industrial company to continue to incur further liabilities during this period.This would be the consequence if sub-section (1) of S.22 is construed to bring about suspension of proceedings for eviction instituted by landlord against a sick industrial company which has ceased to enjoy the protection of the relevant rent law on account of default in payment of rent. It would also mean that the landlord of such a company must continue to suffer a loss by permitting the tenant (sick industrial company) to occupy the premises even though it is not in a position to pay the rent. Such an intention cannot be imputed to Parliament. We are, therefore, of the view that Section 22(1) does not cover a proceeding instituted by a landlord of a sick industrial company for the eviction of the company premises let out to it.'
14. Now reverting to Sec. 22(1) of the SickIndustrial Companies (Special Provisions) Act, , 1985, itis abundantly clear that a blanket interpretation as putup by Mr. Clerk on behalf of the applicant to the phrase'no suit for the recovery of money' cannot be given tothis phrase. This phrase cannot be considered inisolation without the reference to the earlier part ofthe Section or the latter part of the Section. Theearlier part of Section clearly indicates that (i) noproceedings for the winding up of the industrial company,or (ii) for execution distress or the like against any ofthe properties of the industrial company, or (iii) forthe the appointment of a receiver in respect thereof,shall lie or be proceeded with further. The latter partof this phrase i.e. ' no suit for the recovery of money'clearly indicates that for the enforcement of anysecurity against the industrial company or of anyguarantee in respect of any loans or advance granted tothe industrial company no proceeding shall lie or beproceeded with further. Therefore, the phrase 'no suitfor the recovery of money' employed in Sec. 22(1) mustbe read and interpreted not in isolation but with the aidof previous part of the Section and the latter part ofthe section. The totality of the section is to beconsidered and the Section clearly indicates that 'nosuit for the recovery of money' shall be instituted forwinding up of the industrial company or for execution,distress or the like against any of the properties of theindustrial company or for the appointment of the receiverin respect thereof. Like wise, no suit for the recoveryof money shall be instituted or proceeded with for theenforcement of any security against the industrialcompany or of any guarantee in respect of the loans oradvance granted to the industrial company. The object ofthe Sick Industrial Companies (Special Provisions) Act,1985 is to protect the assets of the company and bar isput up in Sec. 22(1) for certain proceedings takenagainst the assets of the company. Now, the question iswhether the proceedings of recovery of arrears areproceedings against the assets of the company as so toattract the bar of Sec. 22(1). The Apex Court in abovementioned decision of Shree Chamundi Moped's case (supra)has pronounced that leasehold interest of the Company inoccupation of the premises as a statutory tenant cannotbe regarded as property of the company for the purpose ofsub-sec.(1) of Sec. 22 of the Sick Industrial Companies(Special Provisions) Act, 1985. Now, here is thequestion of recovery of rent, which is a compensation forthe use and occupation of the premises by the Company byvirtue of Leasehold interest, which is not the propertyof company attracting Sec. 22(1). Therefore, in no way,this recovery of rent can be regarded as proceedingsagainst the assets of the sick company so as to attractprovisions of Sec.22(1).
15. An argument was advanced before the lowerappellate court against this decision of Apex Court thatfrom phrase 'no suit for the recovery of money' and thelatter remaining part of the section is amended in 1994and the decision in Shree Chamundy's case by the ApexCourt was pronounced in 1992 and, therefore, thisdecision of the Apex Court will not be helpful indeciding the issue. In my view, pronouncement of theApex Court in Shree Chamundi Mopeds Limited case must befollowed. The principle which the Apex Court propoundedwas that the leasehold interest of company in a premisesis not the property of the company so as to attract Sec.22(1) of the Sick Industrial Companies (SpecialProvisions) Act, 1985.
16. Be it suit for eviction or suit for recovery ofarrears of rent, the above mentioned principle propoundedby the Apex Court is equally applicable to the recoveryof arrears of rent also. Therefore, the principlepropounded by the Apex Court is not at all affected bythe subsequent Amendment in Sec. 22(1) of the SickIndustrial Companies (Special Provisions) Act, 1985 in1994.
17. The fact remains that sofar as the relationshipof landlord and tenant is concerned, tenant occupies theproperty and is protected against the eviction by rentlegislations, which also provides a guarantee ofcompensation of rent by a tenant to the landlord.Therefore, , by its very nature, as pronounced by theSupreme Court in Shree Chamundi's case (supra), thisrecovery i.e. the recovery of the arrears of rentneither would fall within the previous part i.e. thepart of the Sec. 22(1) which is before the phrase as 'nosuit for the recovery of money' of Sec. 22(1) of the Actnor the same falls in latter part of Sec.22(1) of thephrase 'no suit for the recovery of money' and the phraseas observed earlier, 'no suit for the recovery of money',could be construed with reference to its previous part ofthe Section and the latter part of the section. Thatphrase cannot be taken out of the section and can be usedas a blanket weapon that no suit of any kind could beinstituted or proceeded with against the sick company andthe contention on behalf of the opponent that if such ameaning is given, then it will render sub-sec.(3)redundant is correct and is upheld.
18. Therefore, in view of the nature of the recoveryand that recovery would not fall within the purview ofSec. 22(1) either in the previous part or in the latterpart and that no blanket meaning can be given to thephrase, 'no suit for recovery of money', the contentionsadvanced on behalf of the applicant by Mr. Clerk is notupheld. It is true that the expression 'proceedings' andexpression 'or the like' are required to be given a verywide construction. The Supreme Court in Maharashtra TubeLtd.'s case (supra) has observed that not only legalproceedings but the proceedings pending or to beinstituted before other authority also are includedwithin the sweep of Sec. 22(1) of the Sick IndustrialCompanies (Special Provisions) Act, 1985. But, in thiscase, this question does not arise and hence thisdecision is not helpful for the applicant. Decision ofthe Apex Court in the case of Gram Panchayat (supra)would not be helpful to the applicant because this wasregarding the tax liability of the company to pay taxesto the Gram Panchayat. Recovery of the tax by the GramPanchayat cannot be put at par with the personalobligation to pay rent. Further, it was recovery againstthe property of the company and therefore proceedingswere stayed. In the facts and circumstances of thatcase, the Panchayat was a creditor and the Company was adebtor. While, in this case, the landlord is not acreditor, but the relationship of the landlord and thetenant altogether a different than the company and thecreditor.
19. Even giving the widest possible meaning to thephrase, 'no suit for the recovery of the money' the samewould not include a recovery of the arrears of rent by alandlord against a company. The reason is quite simplethat as pronounced by the Supreme Court in the above caseof Shree Chamundi Mopeds Limited. What is enjoyed by thecompany is a leasehold right which is not a property ofthe company for the purpose of sub-sec. (1) of Sec. 22.
20. The trial court fell into an error in rejectingthe application which was corrected by the Bench of theAppellate Court.
21. In this view of the matter, prima facie, itappears that there is no substance in this RevisionApplication and the same is required to be rejected andhence the same is rejected. No order as to costs.However, the interim relief granted by this court on3.8.1999 shall be continued till 30th September, 1999 incase the applicant intends to approach the higher forum.