MUKAND LTD Vs. MOHATTA AND HECKEL LTD

JUDGEMENT

(1.) BY an order dated October 8, 1999, Justice A. P. Shah directed the stay of further proceedings before the BIFR. It was also ordered that the BIFR should not register the reference. The present application has been made for appointment of a Provisional Liquidator. Mr. Tulzapurkar has pointed out that the amount due and payable by the company to the petitioner is over Rs. 1. 8 crores. Learned Counsel has also pointed out the admission of liability contained in the letter dated September 11, 1997. The company has stated that in spite of best efforts to clear the outstandings to some extent, it has not been possible due to circumstances created by Coal India Ltd. and other Government bodies. According to the company, large amounts are due from Coal India Ltd. and others. An assurance is given that the dues of the petitioner will receive priority as soon as there is improvement in the recoveries of the company. From time to time the company had issued nine cheques in December, 1996, and February, 1997, aggregating to Rs. 1,07,68,679/- to discharge the liabilities. An assurance was given in writing that the cheques will not be dishonoured. In spite of that the cheques have been dishonoured. Due notice under the Negotiable Instruments Act has been given to the company. Criminal complaints are now pending against the company. On receipt of the summons in these complaints by fax dated December 12, 1998, the company made another proposal for repayment of the principal amount of the dishonoured cheques i. e. , Rs. 83,09,346/ -. The company undertook to pay the amount by instalments as under :

(2.) THE company thereafter has made no payment. Notice under Section 434 of the Companies Act has also been served on the company. Mr. Tulzapurkar has submitted that unless the relief of appointment of Provisional Liquidator is given, the very purpose of filing this petition will be defeated. It is for this reason that this Court had been pleased to direct the BIFR not to register the reference. Mr. Sanghvi, learned Counsel appearing for the company has submitted that the order passed by this Court on October 8, 1998, is non est. He submits that this Court has no jurisdiction whatsoever to pass orders concerning the matters which are in the exclusive jurisdiction of the BIFR or the Appellate Authority. Learned Counsel has placed strong reliance on Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, hereinafter referred to as "the Act", in support of his submission. I have perused Section 22 of the Act. In my view, the bar which is contained in Section 22 of the Act would be operative after the registration of the reference. The "plenary" ordinary civil jurisdiction of this Court has not pre-emptorily been taken away by any provision of the Act at a stage when the proceedings have not even commenced under the Act. The proceedings under the BIFR will commence with the registration of the reference under Section 15 of the SICA. Therefore, the bar under Section 22 of the Act would not be applicable. It is the admitted case of the company that they are anxious to register the reference with the BIFR so that the company can be rehabilitated. In my view, this admission in itself is sufficient to indicate that the net worth of the company is less than its accumulated losses and that it is unable to pay its debts. In such circumstances, it would only be appropriate to protect the interest of the petitioner by appointing the Official Liquidator as the Provisional Liquidator. In view of the above, ad interim relief in terms of prayer Clause (a) which reads as under :

(3.) AT this stage Mr. Sanghvi prays that the operation of this order be stayed. In my view, if me operation of this order is stayed, it would defeat the very purpose for which the Judge's summons has been taken out. However, in order to protect the interest of both the parties, the Provisional Liquidator is directed not to take possession for a period of 14 days. At the same time, the BIFR is directed not to register the reference till after the expiry of a period of 21 days.