KSL AND INDUSTRIES LTD Vs. ARIHANT THREADS LTD

JUDGEMENT

(1.) Leave granted.

(2.) The present appeal raises a question of great public importance having far- reaching consequences. The appeal is filed by KSL & Industries Ltd. ('appellant' for short) against final judgment and order passed by the Division Bench of High Court of Delhi on February 23, 2006 in Writ Petition (Civil) Nos. 2041-42 of 2006. By the said judgment, the High Court, set aside the order passed by the Debt Recovery Appellate Tribunal, Delhi ('DRAT' for short) and held that in view of the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereafter referred to as 'SICA'), no recovery proceedings could be effected against the first respondent- Company in the light of the bar contained therein.

(3.) To understand the controversy in its proper perspective, it is necessary to keep in mind the factual matrix of the case. Respondent No. 1 (M/s. Arihant Threads Ltd.) ('Company' for short) was incorporated as a joint venture with Punjab State Industrial Development Corporation. It set up an export oriented spinning unit for manufacturing cotton yarn in the industrial area of Amritsar District of the State of Punjab. In 1992, Goindwal Sahib Industrial & Investment Corporation allotted Plot No. 454, Flocal Point of Goindwal Sahib Industrial Area by way of lease to the Company for a period of 99 years with a specific condition that the lessee will not transfer the interest in the property for first fifteen years without prior permission of the lessor. The lessee was to enjoy the right of possession so long as it continued paying instalments of the premium by due-date and abide by other terms and conditions of the lease. It was, however, stated that the lessee would be entitled to mortgage lease-hold rights to a Bank, Punjab Financial Corporation or Life Insurance Corporation of India as security for a loan to be raised for construction of factory building, purchase of raw materials, etc. The Industrial Development Bank of India ('IDBI' for short) which was the predecessor of the Stressed Assets Stabilisation Fund ('SASF' for short), financed the project undertaken by the Company by way of foreign currency loan and also working capital of Rs. 93.1 million.