LexFERTILIZER CORPORATION OF INDIA LIMITED & ORS. versus M/S COROMANDAL SACKS PRIVATE LIMITED
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
* Author [2024] 5 S.C.R. 321 : 2024 INSC 348 Fertilizer Corporation of India Limited & Ors. v. M/s Coromandal Sacks Private Limited (Civil Appeal Nos. 5366-5367 of 2024) 26 April 2024 [J.B. Pardiwala* and Sandeep Mehta, JJ.] Issue for Consideration Suspension of legal proceedings as envisaged u/s. 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, if would extend to a suit for recovery of money even if the debt sought to be proved in the plaint has not been admitted by the sick industrial company and if so, whether the decree in favour of the original plaintiff could be said to be coram non-judice; and the High Court, if erred in granting 24% compound interest on the principal decretal amount in favour of the original plaintiff. Headnotes Sick Industrial Companies (Special Provisions) Act, 1985 – s. 22(1) – Suspension of legal proceedings – Suit for the recovery of money instituted by the original plaintiff-small- scale industrial undertaking against the defendant company during the pendency of proceedings in respect of the defendant company before the BIFR, though later the defendant company ceased to be a sick industrial company – Trial court holding that the defendant company failed to prove that it was a sick industry, decreed the suit granting 12% interest pa on the amount – In appeal, the High Court granted 24% compound interest on the amount due – Suspension of legal proceedings u/s. 22(1), if would extend to a suit for recovery of money even if the debt sought to be proved in the plaint not admitted by the sick industrial company and if so, the decree in favour of the original plaintiff if could be said to be coram non-judice: Held: Suit instituted by the original plaintiff not hit by the embargo envisaged u/s. 22(1) – Thus, the decree awarded in favour of the original plaintiff by the trial court and modified by the High Court, cannot be said to be coram nonjudice – Suit for recovery was not of a nature which could have proved to be a threat to the properties 322 [2024] 5 S.C.R. Digital Supreme Court Reports of the defendant sick company or would have adversely impacted the scheme of revival – Suit was a simple suit for recovery of money towards the dues arising under the alleged illegal deductions under the contract – This could not be said to be a proceeding in the nature of execution, distress or the like and thus, not hit by s. 22(1) – Furthermore, the legislature did not intend to include even the proceedings for the adjudication of the liabilities not admitted by a sick company within the protective ambit of s. 22(1) – Such an adjudicatory process only determines the liability of the defendant towards the plaintiff, and does not threaten the assets of the sick company or interfere with the formulation of the scheme unless execution proceedings are initiated pursuant to the completion of such adjudicatory process. [Paras 98, 99, 142] Sick Industrial Companies (Special Provisions) Act, 1985 – s. 22(1) – Application of mischief rule: Held: Applying the mischief rule to s. 22(1), it is found there was a vacuum in the legal framework to deal with sick industrial companies and provide ameliorative steps for their revival – 1985 Act was enacted to fill in this vacuum – Mischief which was sought to be dealt with by the enactment of s. 22 was any such legal proceeding which could impact the assets of the sick company and in-turn negatively impact the formulation and implementation of the rehabilitative scheme – This provision was inserted to provide a remedy by ensuring that the multiple recourses available under the law for recovery of debts, etc. were suspended for the period during which the sick company was under the ameliorative shelter of the BIFR – It was to shield the formulation and implementation of the revival scheme from any impediments thereby maximising the chances of revival of sick company, the ultimate object sought to be achieved by the Act. [Para 101] Sick Industrial Companies (Special Provisions) Act, 1985 – ss. 22(1), 16, 17 and 25 – Benefit of suspension of legal proceedings in respect of sick industrial company u/s. 22(1) – Conditions to be fulfilled for the applicability of s. 22(1): Held: Firstly an inquiry u/s. 16 must be pending; or any scheme referred to in s. 17 must be under preparation or consideration or a sanctioned scheme must be under implementation; or an appeal u/s. 25 must be pending-in relati
Excerpt shown. Read the full judgment & AI analysis in Lexace.