Dyna Lamps and Glass Works Limited Vs Union of India Uoi - Citation 824814 - Court Judgment

Judgment:
ORDER

E. Padmanabhan, J.

1. The petitioner prays for the issue of a writ of mandamus for bearing the respondents 1, 2 and 5 from taking steps including enforcement encashing or appropriation and the third and fourth respondents from paying the amounts pursuant to the invocation of indemnity cum surety bonds (1) dated 4-5-1992 for a value of Rs. 2,64,04,000/- in respect of Licence No. P/CG/2129184, dated 27-1-1992 issued by third respondent Bank and (2) dated 3-2-1993 for a value of Rs. 40,04,000/- in respect of Licence No. P/CG/2100383, dated 31-7-1992 issued by the fourth respondent Bank issued in favour of the second respondent pending finalisation of Rehabilitation package scheme before the BIFR without the consent of BIFR and until the expiry of the extended period till 2002, within which the petitioner has to comply with the export obligations with reference to which the Indemnity cum Surety bonds were furnished.

2. This Court granted interim injunction on 2-11-1999 in W.M.P. No. 25667 of 1999 and it has been extended on 19-11-1999 until further orders. To vacate the interim orders, the respondents 1 and 2 have moved W.M.P. No : 25067 of 2000. When the applications came up for orders, as it was represented that the arguments in the interim applications as well as the main writ petition are one and the same, the writ petition itself could be disposed of. In the light of the said representation, this Court heard the writ petition itself and reserved orders.

3. Heard Mr. S. Parthasarathy, learned Counsel appearing for Mr. Mohan Parasaran, for the petitioner and Mr. V.T. Gopalan, learned Additional Solicitor General, appearing for Mr. 3. Udayakumar, Additional Central Government Standing Counsel, appearing for respondents 1, 2 and 5.

4. At the outset it is essential to set out few facts which are not in controversy. The petitioner-company entered into a Joint Venture with the Tamil Nadu Industrial Development Corporation. The petitioner-company applied for import licence under Export Promotion Counter Guarantee Scheme, shortly referred to as EPCG scheme, which has since been renamed as Export Promotion Capital Goods Scheme. In terms of the said scheme, the petitioner-company had undertaken to comply with Export Obligation in proportion to the import licence issued in its favour. The Export Obligation was fixed thrice the CIF value, which obligation has to be fulfilled within theperiod of four years from the date of first import and five years in respect of the second import from the date of first import. For performance of the export obligation within the stipulated period, the petitioner-company as was stipulated and required, furnished Bank guarantees in respect of both the import licences through the respondent Banks 3 and 4. Before the period stipulated for accomplishing the export obligation undertaken, the petitioner-company went into financial problems and had moved an application under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act 1985, before the Board for Industrial and Financial Reconstruction in case No. 96 of 1996 'in Re : Dyna Lamps & Glass Works Ltd.' The Board for Industrial and Financial Reconstruction entertained the application, appointed an Operating Agency and directed the said Agency to file a report by order dated 19-2-1997. The proceedings are said to be pending before the BIFR. The respondents are not parties nor the obligation under the bank guarantees have been set out or included in the said proceedings as the liability had not arisen at that juncture.

5. In the meanwhile, on 8-3-1999, the first respondent addressed the third and fourth respondents-Banks in respect of Bank guarantees furnished by them at the instance of the writ petitioner-company and advised the Banks to keep the Bank guarantees alive by way of extending the validity of Bank guarantee or by seeking fresh guarantee besides requiring the Banks not to release the existing Bank guarantee till further instructions from the first respondent. The first respondent while marking a copy of the same required the petitioner to advise the petitioner to extend the guarantee, besides advised the petitioner to furnish statement of the export performance so far accomplished in the prescribed form of Appendix 10(c) of current Hand Book of Procedure duly certified by the Chartered Accountant and Bank.

6. After further steps the guarantees were invoked. The third and fourth respondent-bank by its communication intimated the petitioner that the first respondent had invoked the guarantee as the writ petitioner had failed to discharge the export undertaken obligation before the stipulated period and that he had failed to achieve the requisite export earning in fully convertible currency and the first respondent had called the banks to deposit the bank guarantee amount within fifteen days. The Banks in turn called upon the petitioner to make arrangements for remitting the amount to honour the commitment under the guarantee. Hence, the present writ petition seeking the relief of mandamus.

7. The petitioner had also moved the first respondent while furnishing the statement containing details of a small portion of exports so far made towards the import licence issued in its favour and requested the first respondent to give them the benefit of extended period up to 30-3-2001. Con-cedingly the petitioner had not accomplished export obligation which it had undertaken and only a fraction of the export obligation had been achieved. Hence, there is every justification for the first respondent to have invoked the guarantee.

8. The learned Counsel for the petitioner contended that when the proceedings under the Sick Industrial Companies (Special Provisions) Act are pending, the invocation of guarantee by the respondents is impermissible without the leave of BIFR and such an invocation is barred by the provisionsof the said Act. The learned Counsel also contended that when the Government of India had extended the period for performance of the export obligation by its later Notification issued on 6th April 1999, till 31-3-2002 whether there could be a valid invocation of the bank guarantees ?

9. Per contra, it was contended on behalf of respondents 1 to 3 that the obligation with respect to which the bank guarantees had been furnished, will not fall under Section 22 or any other provisions of the SICA Act. It was nextly contended that there is no automatic extension of time to complete the export obligation as sought to be suggested. Unless and until the petitioner complies with the conditions imposed for extension in terms of Public Notice No. 5/REFF/1997-2002 issued by the Ministry of Commerce, Government of India, dated 6-4-1999, published in the Gazette of Government of India Extra ordinary, Part-I, Section-II, there is no automatic extension of period for the discharge of export obligation. In this case the petitioner had failed to comply with the requirements of the said notification and therefore, the petitioner cannot contend that the period is extended automatically.

10. Learned Additional Solicitor General contended that this Court will not interdict with the invocation of bank guarantees unless fraud is established as has been held by the Apex Court in Hindustan Steel Workers Construction Ltd. v. G.S. Atwal & Co. (Engineers) Pvt. Ltd., reported in : etc., and other catena of decisions. In terms of the stipulations in the Bank guarantees, the guarantees have been invoked and without reference to the writ petitioner, the banks should honour the guarantee and there shall not be any injunction or forbearance or any direction with respect to invocation of bank guarantees by the first respondent. It is obligatory for the Banks to honour the guarantees given by them.

11. The law relating to invocation of bank guarantees is well settled and there is no controversy with respect to the legal position. However, the points that arise for consideration, admittedly had not been decided by the Apex Court in its earlier pronouncements. The relevant point to be examined would be. When proceedings are pending in respect of the petitioner-company before the BIFR under the SICA Act and other provisions, whether the guarantees could be invoked ?

12. The learned Counsel for the petitioner referred to earlier pronouncements of the Apex Court wherein the scope of Section 22 of the SICA Act had been considered by Their Lordships of the Supreme Court in respect of a loan transaction or arrears of tax, liability incurred under a contract and like, which undoubtedly fell within the ambit of Section 22(3) or (4) of the Act. It is contended by the Counsel for the respondents that those cases are distinguishable on facts and the said pronouncements will have no application to the facts of the case.

13. The following points arise for consideration :

(a) Whether by virtue of the public notification issued by the Government of India on 6-4-1999 in exercise of powers conferred under Export and Import Policy, the time granted to accomplish the export obligation is deemed to have been extended and Whether the writ petitioner could avail the benefit of the Public Notice issued dated, 6th April 1999 ?

(ii) Whether the invocation and enforcement of bank guarantees consequent to non fulfillment or export obligation under EPCG licence is barred or suspended by virtue of the pending proceedings under the SICA Act

14. There is no controversy with respect to the writ petitioner availing the benefits of EPCG Scheme and its undertaking to fulfil the obligation before the stipulated period and perform the guarantee as well as the furnishing bank guarantees in that respect in favour of the first respondent. It is also admitted that the export obligation undertaken after utilising import licence had not been fulfilled by the writ petitioner. It is clear from the facts that substantial portion of the obligation had not been discharged and therefore the bank guarantee had been rightly invoked after due notice to the writ petitioner.

15. The public notice merely enabled the licence-holder who had failed to complete its export obligation within the stipulated period to apply for extension of export obligation for a period of 1 1/2 years from the date of public notice subject to certain conditions set out therein. The relevant portion of the public notice reads thus :-

'In exercise of powers conferred under Paragraphs 4, 11 of the Export and Import Policy, 1997-2002, as notified in the Gazette of India extraordinary, Part-II, Section 3 Sub-section (ii) vide S.O. No. 283(E), dated 31-3-1997, the Director General of Foreign Trade hereby lays down the following guidelines for extension in export obligation period in respect of EPCG and advance licences:

1. In respect of Advance Licences issued on or after 1-4-1992, where the licence holder has failed to complete his export obligation within the stipulated time limit, he can apply for extension of export obligation period for 1 1/2 years from the date of the Public Notice, on submission of a Bank Guarantee, covering the customs duty together with 24% simple interest on the unutilised exempt material from the date of import up to 31-3-2001, which shall be forfeited in the event of non-fulfillment of export obligation in the extended period Bank Guarantee should be valid up to 31-3-2002.

2. In respect of EPCG licences issued in pursuance of the following notifications, the licence holder shall be deemed to be eligible for extension of export obligation period up to 31-3-2001 provided the licence holder who has failed to complete his export obligation within the earlier stipulated time limit, applies for extension of export obligation period on submission of a Bank Guarantee, covering the Customs duty in proportion to the unfulfilled export obligation together with 24% simple interest thereon from the date of import up to 30-9-2001.

3. The request for extension shall be filed with the concerned licensing authority within a period of 60 days from the date of the Public Notice. The licensing authority which originally issued the licence shall be competent to grant extension in export obligation period.

5. In such cases where the licence holder has not availed the facility accorded under this Public Notice, adjudication proceeding shall be initiated on the expiry of 60 days from the date of this Public Notice.'

16. Except forwarding a letter dated 3rd July, 1999, concedingly the petitioner had not complied with any of the requirements prescribed for the extension of time as notified by the Ministry of Commerce. Even as of today,it is stated that the writ petitioner had not complied with the requirements and hence no extension had been granted to the petitioner. The petitioner had failed to avail the benefit of the Notification by complying with the conditions stipulated therein. Therefore, the petitioner cannot complain having failed to avail the opportunity. Hence, it is clear that there could be no extension of the period stipulated to discharge the export obligation in the case of the petitioner. Hence, the first point is answered against the writ petitioner.

17. Taking up the next and last point for consideration to be placed on the question revolves around the constructions of Section 22 of Sick Industrial Companies (Special provisions) Act, 1985 vis-a-vis the nature and liability incurred by the writ petitioner and the invocation of guarantee by the first respondent. It is true that legal proceedings are pending under Section 22 of the SICA Act in respect of the petitioner, an industrial company and the BIFR is seized of the matter.

18. The present action is not for winding up of the petitioner-company, nor it is for execution of decree, nor it is a distress action or like against the petitioner-company or its assets, nor it is for appointment of a receiver in respect thereof. What is sought to be pointed out by the learned Counsel for the petitioner is that the bank guarantees which have already been invoked will fall under the expression 'no suit for recovery of money or for the enforcement of any security against an 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' appearing in Section 22 of the Act.

19. What is the meaning and scope of the said expression has to be considered, it is contended for the respondents that the entire expression has to be read in the context of loan or advance made or granted to the industrial company. It is sought to be contended by the learned Additional Solicitor General that the bank guarantee in this case having been furnished under the Act and special Import and Export Scheme is neither a loan transaction, nor it is an advance, while Mr. S. Parthasarathy, learned Counsel appearing for the petitioner contends that the said expression covers all kinds of guarantees which could be invoked or enforced without reference to the petitioner -company.

20. A reading of sub-section (1) of Section 22 of the SICA Act, according to the Counsel for the petitioner has to be given on all comprehensive or wider meaning so as to include all kind of guarantees or liabilities whatsoever as the liability in respect of a statutory liability or tax liability as already held to be included by various decisions of the Apex Court and therefore the bank guarantees which are sought to be invoked and enforced is suspended by virtue of Section 22 of SICA Act and hence, the respondent cannot proceed.

21. The learned Additional Solicitor General while relying upon the pronouncements of the Supreme Court contended that there shall be no interdiction or stay or injunction by a Court in respect of a bank guarantee which is enforceable on its terms and interdiction or injunction or restriction if any by a Court of law is impermissible except in case of fraud or like. This proposition of law is not in dispute by the Counsel for the petitioner. In thisrespect the learned Additional Solicitor General relied upon the judgment of the Apex Court in Hindustan Steel Workers Construction Company v. G.S. Atwal and Company, reported in : In that context, Their Lordships of the Apex Court held thus :-

'The principles to be borne in mind by the Court in the matter of grant of injunction against enforcement of a bank guarantee irrevocable letter of credit have been laid down in a catena of decisions of this Court. We have referred to the said principles in Larsen & Toubro Ltd. v. Maharashtra SEE which was heard along with this appeal. It is unnecessary to restate the said principles. Suffice it to say that in the case of confirmed bank guarantees irrevocable letters of credit, the Court will not interfere with the same unless there is fraud and irretrievable damages are involved in the case and fraud has to be an established fraud.'

22. It is unnecessary to multiply the case law on this point. There is no quarrel in this respect. But what is being relied upon and invoked is Section 22 of the SICA Act. Sub-section (4) of Section 22 also is relied upon by the Counsel for the writ petitioner, which according to the learned Counsel for the petitioner, notwithstanding anything contained in the Company's Act or any other law or instrument, on a declaration being made under Subsection (3) of Section 22, there could be no enforcement of any right, privilege, obligation and liability suspended or modified by declaration issued under Sub-section (3) of Section 22 and all proceedings relating there to pending before any Court, Tribunal or other authority etc., shall remain stayed or to be continued subject to such declaration. According to the learned Counsel for the petitioner, the said Sub-section has got a overriding effect and therefore the bank guarantee cannot be invoked or enforced by the respondents 1 and 2 even though the guarantee is to secure the export obligation and it is not out of a contract or a liability by way of advance or loan and that such a privilege or obligation is suspended. This is the precise question that has to be decided.

23. The learned Counsel for the petitioner relies upon the decision in Tata Davy Ltd. etc. v. State of Orissa and Ors. reported in : as well as Gram Panchayat v. Shree Vallabh Glass Works Ltd., reported in : and Deputy Commercial Tax Officer and Ors. v. Corromandal Pharmaceutical and Ors. reported in : In Tata Davy Ltd. v. State of Orissa, their Lordships of the Apex Court held thus :-

'12. ............ Section 22 of the Central Act requires all creditors seeking torecover their dues from sick industrial companies in respect or whom an inquiry under Section 16 is pending or a scheme is under preparation or consideration or has been sanctioned to obtain the consent of the said Board to such recovery. If such consent is not secured and the recovery is deferred, the creditor's remedy is protected for the period of deferment is, by reason of Sub-section (5) of Section 22, excluded in the computation of the period of limitation. The words 'any other law' in Section 22 cannot, therefore, be read in the manner suggested by learned Counsel for the respondents.

13. The Corromandal Pharmaceuticals judgment dealt with a sick industrial company which was enabled to collect amounts like sales tax after the date of the sanctioned scheme. This Court said, 'such amounts like sales tax, etc. which the sick industrial company is enabled to collect after thedate 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.' It added that the issue that has been arisen before it had not arisen in the case of Vallabh Glass Works. It did not appear therefrom or from any other decision of this Court or of the High Courts 'that in any one of them, the liability of the sick company dealt with therein itself arose for the first time after the date of sanctioned scheme. At any rate, in none of these cases a situation arose whereby the sick industrial unit was enabled to collect tax due to the Revenue from the customers after the sanctioned scheme but the sick unit simply folded its hands and declined to pay it over to the Revenue, for which proceedings for recovery had to be taken. 'Clearly the facts in the Corromandal Pharmaceuticals case differ from the facts of the Vallabh Glass Works case and those before us. The Reference to the Corromandal Pharmacenticals case is, therefore, inapposite.

14. We hold, in the premises, that the respondents cannot recover the aforementioned arrears of sales tax from the appellants without first seeking the consent of the said Board in this behalf.'

24. In Gram Panchayat and Another v. Shree Vallabh Glass Works Limited and Others, cited supra, while construing Section 22(1), their Lordships of the Apex Court held thus :-

'Section 22(1) provides that in case the enquiry under Section 15 is pending or any scheme referred to under Section 17 is under preparation or consideration by the Board or any appeal under Section 25 is pending then certain proceedings against the sick industrial company are to be suspended or presumed to be suspended. The nature of the proceedings which are automatically suspended are : (1) Winding up of the industrial company; (2) proceedings for execution, distress or the like against the properties of sick industrial company; and (3) Proceedings for the appointment of receiver. The proceedings in respect of these matters could, however, be continued against the sick industrial company with the consent or approval of the Board or of the appellate authority as the case may be.'

25. In Patheja Brothers Forgings and Stamping and Anr. v. ICICI Ltd. and Anr., reported in : while overruling the decision of the Bombay High Court, the Apex Court held thus :-

'7. The words in the square brackets above were inserted into Section 22 by Act, 12 of 1994 and it is these words which are relevant for our purposes. As we read them, they provide that no suit

(a) for the recovery of money, or

(b) for the enforcement

(i) of any security against the industrial company, or

(ii) of any guarantee in respect of any loans or advance granted to the industrial company :

shall lie or be proceeded with except with the consent of the Board or the appellate authority under the said Act. For our purposes, therefore, the relevant words are : 'no suit.... for the enforcement... of any guarantee in respect of any loans or advance granted to the industrial company' shall lie without the consent of the Board or the appellate authority. The words are crystal clear. There is no ambiguity therein. It must, therefore, be held that no suit for the enforcement of a guarantee in respect of a loan or advance granted to the industrial company concerned will lie or can be proceededwith, without the sanction of the Board or the appellate authority under the said Act.

8. It is not possible to read the relevant words in Section 22 as meaning that only a suit against the industrial company will not lie without such consent. There is no requirement in Section 22, as analysed above, that, to be covered thereby, a suit for the enforcement of a guarantee in respect of a loan or advance to the industrial company should be against the industrial company.'

From this judgment it is clear and it is the emphasis that proceeding for recovery or for enforcement of any guarantee in respect of any loan or advance granted to the industrial company alone would fall within the ambit of Section 22 and not every liability. It has to be at any rate a loan transaction or advance so as to attract the umbrella spread out by Section 22 of the Act. This is made clear by their Lordships of the Supreme Court in the said Patheja Brothers's case, wherein it has been held thus :

'12. We have analysed the relevant words in Section 22 and found that they are clear and unambiguous and that they provide that no suit for the enforcement of a guarantee in respect of any loan or advance granted to the industrial company concerned will lie or can be proceeded with without the consent of the Board or the appellate authority. When the words of a legislation are clear, the Court must give effect to them as they stand and cannot demur on the ground that the legislature must have intended otherwise.'

26. In Rishabh Agro Industries Ltd. v. PNB Capital Services Ltd., reported in : their Lordships have construed Sub-section (1), (3) and (4) of Section 22 and on the object of the Act, it has been held thus :

'The object of the Act appears to be to afford maximum protection of employment, optimise the use of financial resources, salvaging the assets of production, realising the amounts due to the banks and to replace the existing for time consuming and inadequate machinery by efficient machinery for expeditious determination by a body of experts to safeguard the economy of the country and protect viably sick units. Chapter III deals with the reference, inquiries and claims. Section 15 provides that when an industrial company becomes a sick industrial company as defined under Section 2(o) of the Act, the Board of Directors of the company, shall, within 60 days from the date of finalisation of the duly audited accounts of the company for the financial year make a reference to the Board for determination of the measures which shall be adopted with respect to the company.'

27. In Patheja Brother's case, cited (supra), as already pointed out the Apex Court emphasised that the Legislature intended to protect the personal interest of the guarantors as proceedings against guarantors and their personal properties would not affect the revival of the industrial company in any manner whatsoever. In the circumstances the words 'of any guarantee in respect of any loan or advance granted to the industrial company in the context will have to be read as a guarantee given by the industrial company towards loan or advance and none else'. Section 22 is clear and unambiguous in that they provide that no suit for the enforcement of a guarantee in respect of any loan or advance granted to the concerned industrial company will lie or can be proceeded without the consent of the Board or the Appellate Authority.

28. The decision of the Apex Court in Borukha Steel Ltd. v. FairgrowthFinancial Services Ltd. reported in 1997 (89) Company Cases page 547, has been approved by the later Full Bench judgment in Salidair (India) Ltd. v. Fair-growth Financial Services Ltd. and others reported in 2001 (104) C C 569.

29. In the light of the said pronouncements of the Apex Court the emphasis being that the transaction should be loan or advance and not every other kind of liabilities as in the present case. In the present case it is admitted that it is neither a loan, nor an advance by a creditor. On the other hand in terms of the Notification No. 169/90-Customs, dated 3rd May, 1990 specifying the exemption from the levy and payment of import duty in exercise of 25% of the ad valorem customs duty, the writ petitioner was permitted to import capital goods on the import licence issued for such capital goods in terms of the Government of India Notification read with Import and Export Policy 1990-1993. An import licence was granted for the value for the import of capital goods listed out in the schedule on the terms and conditions specified therein. At the same time the petitioner who is an importer, had agreed to export the goods namely, the finished products in its factory of the particular value, which is not less than three times of the CIF value of the imported capital goods. The petitioner had imported to fulfill the said export obligation which alone entailed exemption of import duty within the said period export obligation to be accomplished and to enforce compliance it had furnished the Bank guarantee before the clearance of the capital goods. According to it if the petitioner fails to fulfil the export obligation the bank guarantee will be enforced, besides it may result in forfeiture of other concessional levy.

30. By the guarantees also the guarantor had agreed to abide by the conditions as provided in the agreement and without reference to the importer on the written demand of the Government, the Bank has to pay the amount. This transaction is not a loan transaction or an advance so that it will get suspended or unenforceable under any one of Sub-sections of Section 22. The export obligation, admittedly the writ petitioner had failed to accomplish. Therefore, the bank guarantees have been rightly invoked.

31. The guarantees have not been given for repayment of a loan or like liability, nor it is a liability which has accrued due by way of advance payable or other liability, but a procedure by which the petitioner had undertaken to comply with the requirements of the import export policy and to avail the concession of duty. But for the guarantee given by the Bank duty free import of capital goods would not have been permitted. It is the assurance of the bank which enabled the petitioner to avail the duty free import.

32. It is fundamental that the language of the statute has to be read as it is and no addition or substraction of words is permissible. The object is to give protection to the industries which are unable to repay the loans or advance or liability of like nature. In terms of the provision of Import and Export Control Act notifications have been issued and in terms of the said notification what has been undertaken by the petitioner is to discharge performance the obligation as per the notification by availing the benefit of the scheme and importing capital goods or machineries free of duty or at a concessional rate. The failure to re-export had led to the respondent enforcing the provisions of the scheme under which capital goods have been importedwith the concomitant obligation to re-export before a particular date and the value to be exported being thrice the value of the capital goods imported under a licence. It is a concessions which has been provided for and availed.

33. To enforce the provisions of the notification, bank guarantee was directed to be furnished. Therefore, it is clear that this is not a loan transaction, but it is an obligation undertaken as performance, failure of which led to the invocation of bank guarantees. In other words it is an enforcement of the provisions of the scheme read with statutory provisions of the Import and Export Control legislations or notifications issued thereunder.

34. By the enforcement of Bank guarantees the Banker has to pay the amount guaranteed without reference to petitioner and nothing more so far as the respondents 1 to 3 are concerned. However, it may result in the petitioner being called to pay such amount as demanded by the Bank. At that point it turns to be a loan between banker and the petitioner or an advancement, The provisions of Section 22 in my considered view could be invoked by the petitioner against the banker at the stage and not at any stage earlier.

35. In Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd., and Ors. reported in : the Apex Court held that Section 22 does not bar criminal proceedings against the company or its directors with respect to the dishonour of cheque drawn by a company towards payments due by the Company. In that context, it has been held thus :-

'16. A contention was raised on behalf of the appellants that if the criminal case proceeded with and the appellants are convicted and sentenced to fine then it will be necessary to realise the amount of fine from the assets of the Company which would be impermissible in view of the provisions of Section 22 of SICA. We have no hesitation in rejecting this contention. In fact the same contention was considered by us at length in BSI Ltd. v. Gift Holdings and it was repelled. In our considered view the contention is premature and far-fetched as the occasion to realise fine from the accused company or its Directors will arise only in case they are convicted and sentence of fine is imposed on them. That is not a ground to hold that the criminal proceedings should be foreclosed at the threshold.

17. Another contention which was raised on behalf of the appellant in this connection is that if the Directors of the Company on being convicted are arrested and kept in jail the efforts of BIFR for reconstruction/revival of the Company will not be possible and in that event the very purpose of inquiry by BIFR will be rendered futile. The contention is too remote and the apprehension far-fetched. We reject the said contention.

18. In our considered view Section 22 SICA does not create any legal impediment for instituting and proceeding with a criminal case on the allegations of an offence under Section 138 of the NI Act against a company or its directors. The section as we read it only creates an embargo against disposal of assets of the company for recovery of its debts. The purpose of such an embargo is to preserve the assets of the company from being attached or sold for realisation of dues of the creditors. The section does not bar payment of money by the company or its directors to other persons for satisfaction of their legally enforceable dues.'

36. In Gujarat Steel Tubes Company Ltd. v. Virchandbhai B. Shah, reported in : the Apex Court held that filing of eviction petition on the ground of non payment of rent cannot be regarded as a suit filed forrecovery in nature and therefore Section 22 will not get attracted.

37. Further, neither the respondent is a party to the proceedings before the BIFR, nor the respondents claim or entitlement to get bank guarantees invoked were sham in the liability and it will not fall under the contingencies provided under Section 22 of the SICA Act.

38. In fact the liability to pay arises after the Company became sick and after the company moving the BIFR and getting a scheme being sanctioned. In Deputy Commercial Tax Officer and Others v. Corromandal Pharmaceuticals and Ors. reported in : it has been held that in the totality of the circumstances the bar or embargo envisaged by Section 22(1) of the Act can apply only to such of those dues reckoned or included in the sanctioned scheme and not to amounts like sales tax etc., which the industrial company is unable to collect after the date of sanctioned scheme and legitimately belonging to revenue and it cannot be and could not have been intended to be covered by Section 22 of the Act. In that context, it has been held thus :-

'13 ..... It is in implementation of the scheme wherein various preventive, remedial or other measures are designed for the sick industrial company, steps by way of giving financial assistance etc., by Government, banks or other institutions, are contemplated. In other words, the scheme is implemented or given effect to, by affording financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices by Government, banks, public financial institutions and other authorities. In order to see that the scheme is successfully implemented and no impediment is caused for the successful carrying out of the scheme, the Board is enabled to have a say when the steps for recovery of the amounts or other coercive proceedings are taken against sick industrial company which, during the relevant time, acts under the guidance/control or supervision of the Board (BIFR). Any step for execution, distress or the like against the properties of the industrial company or other similar steps should not be pursued which will cause delay or impediment in the implementation of the sanctioned scheme. In order to safeguard such state of affairs, en embargo or bar is placed under Section 22 of the Act against any step for execution, distress or the like or other similar proceedings against the company without the consent of the Board or, as the case may be, the appellate authority. The language of Section 22 of the Act is certainly wide. But, in the totality of the circumstances, the safeguard is only against the impediment, that is likely to be caused in the implementation of the scheme. If that be so, only the liability or amounts covered by the scheme will be taken in, by Section 22 of the Act. So, we are of the view that though the language of Section 22 of the Act 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 under Section 25 of the Act, it will be reasonable to hold that the bar or embargo envisaged in Section 22(1) of the Act can apply only to such of those due 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 withhold it indefinitely and unreasonably. Such a construction which is unfair, un-reasonable and against the spirit of the statute in a business sense, should be avoided.

14. The situation which has arisen in this case seems to be rather exceptional. The issue that has arisen in this appeal did not arise for consideration in the two cases decided by this Court in Gram Panchayat v. Shree Val-labh Glass Works Ltd., and Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn., of Maharashtra Ltd. It does not appear from the above two decisions of this Court nor from the decisions of the various High Courts brought to our notice, that it any one of them, the liability of the sick company dealt with therein itself arose, for the first time after the date of sanctioned scheme. At any rate, in none of those cases, a situation arose whereby the sick industrial unit was enabled to collect tax due to the Revenue from the customers after the 'sanctioned scheme' but the sick unit simply folded its hands and declined to pay it over to the Revenue, for which proceedings for recovery, had to be taken. The two decisions of this Court as also the decisions of High Courts brought to our notice are, therefore, distinguishable. They will not apply to a situation as has arisen in this case. We are, therefore, of the opinion that Section 22(1) should be read down or understood as contended by the Revenue. The decision to the contrary by the High Court is unreasonable and unsustainable.'

40. The Import and Export (Trade) Policy, 1990-1993 as has been held by the Apex Court, has to be read as a package scheme. In allowing exemption to import of capital goods and permitting a licensee to export proportionately and fixing the export obligation under a licence, it has an effect of an exemption by which the levy of customs duty is relaxed to encourage the exports.

41. Section 3 of the Foreign Trade (Development and Regulation) Act, 1992 enables the Central Government by order make provision for the development and regulation of foreign trade, for facilitating imports and increasing exports. Section 11 provides for initiating action for contraventions of the provisions, rules or order or export and import policy. The import policy, concedingly consist export thrice the value of the import licence to be exported and in the event of failure to achieve the same contingency had been provided for, which is in terms of Section 11 of the act. Therefore, it is for the violation of statutory notification which is penal in obligation i.e., public delicts and it is to enforce the policy in terms of the said provision condition has been imposed.

42. Therefore it neither forms part, nor it will fall under the category of loan or advancement, nor it is an obligation falling under Section 22 of the Act. The obligation with respect to which the Bank guarantees were furnished is a distinct obligation which arise from injuries but obligations which are styled analogically obligations 'quasi ex contractu'. It is in the nature of liability which is being enforced for violation of the policy or the import licence. Hence, Section 22 of the SICA Act cannot be invoked and the petitioner is not entitled to any relief. Further, enforcement of guarantees furnished, which guarantees the bank is bound to honour as the petitioner's liability to the said obligation has neither ceased nor suspended, nor extinguished by operation of law. The bank has to honour its commitment and proceed against the petitioner. It is only at that stage Section 22 of the Act may get attracted or may not even get attracted. Hence the petitioner is not enti-tied to the relief of mandamus in any view of the matter.

43. In the result, the writ petition is dismissed. Consequently, connected W.M.Ps are also dismissed. No costs.

Subject	Customs
Court	Chennai High Court
Decided On	Apr-30-2001
Case Number	Writ Petition No. 17645 of 1999 and W.M.P. Nos. 25667 of 1999 and 25067 of 2000
Judge	E. Padmanabhan, J.
Reported in	[2003]115CompCas401(Mad); 2002(146)ELT287(Mad); [2004]52SCL186(Mad)
Acts	Constitution of India - Article 226; Sick Industrial Companies (Special Provisions) Act, 1985 - Sections 22
Appellant	Dyna Lamps and Glass Works Limited
Respondent	Union of India (Uoi)
Appellant Advocate	S. Parthasarathy, Learned Counsel for ;Mohan Parasaran, Adv.
Respondent Advocate	V.T. Gopalan, ASG for ;S. Udayakumar, ACGSC
Disposition	Petition dismissed
Cases Referred	and Maharashtra Tubes Ltd. v. State Industrial

Dyna Lamps and Glass Works Limited Vs. Union of India (Uoi) - Court Judgment