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Section 22(1) and fall within one or more of the categories of proceedings indicated in the said provision and b) additionally, the continuance of the proceeding should have the impact of interfering with the formulation of the scheme.

26. The Supreme Court has also made it clear that the applicability of the embargo contained in Section 22(1) of SICA depends on the facts and circumstances of each individual case; and no principle of universal application can be laid down in all such matters.

27. The use of the expressions “Firstly” and “Secondly”, in para 80 of Raheja Universal Ltd. (supra) would make it clear that both the conditions given in the judgment have to be satisfied cumulatively. Even if the suit/proceeding is of the category contemplated in Section 22(1), that by itself will not attract the bar contained in the said provision, unless it additionally has the impact of “interfering with the formulation, consideration, finalisation or implementation of the scheme.” (Emphasis supplied)

89Copy pinpoint89. A Division Bench of the Delhi High Court in Saketh India (supra) considered the scope of Section 22(1) of the 1985 Act in the context of the object sought to be achieved by it and held that the term ‘suit for recovery’ as it appears in the said provision must be construed ejusdem generis, meaning thereby that only such a suit for recovery which is in the nature of execution or any other coercive enforcement will be suspended by the effect of the provision. The relevant parts of the said decision are extracted hereinbelow: “5. We think it appropriate, however, to consider the provision of SICA and analyse what it endeavours to achieve. We must immediately take note of the fact that SICA has been repealed by Sick Industrial Companies (Special Provisions) Repeal Act, 2003. While it is yet to be notified, it is significant that provisions akin to Section 22 are conspicuous by their absence in the new Scheme of revival of sick companies inserted in form of Part VIA, namely, “Revival and Rehabilitation of Sick Industrial Companies”.

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Obviously, empirical analysis discloses that more often than not companies which have sought shelter of SICA have done so to procrastinate, delay and defer clearing its liability, with the obvious intention of coercing creditors into unfair settlements rather than implementing projected schemes supposed to assist in their reconstruction. When the statute is notified, amendments to the Companies Act, 1956 will become effective and all proceedings pending before BIFR will stand abated. To some extent, therefore, the present controversy has been rendered academic.

6. Courts, however, have always been alive to the possible mischief that invocation of SICA can lead to. In a nutshell, where the not worth of a company is reduced to a negative, and the amelioration that is sought is for reviving the company rather than winding it up, the recourse to the Act would be legitimate. There is no justifiable reason, therefore, for all legal proceedings to be immediately even held in abeyance, if not dismissed. We are mindful of the fact that Parliament has incorporated an amendment in the Section with effect from 1.2.1994 in these words — “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”. It appears to us that the phrase “recovery of money” must be construed ejusdem generis and accordingly recovery proceedings in the nature of execution or any other coercive enforcement that has been ordained to be not maintainable. We do not find any logic in holding legal proceedings to be not maintainable, or to be liable to be halted unless, even if the debt sought to be proved in the Plaint has not been admitted. Given the delays presently endemic in the justice delivery system if a creditor is disallowed even from proving the indebtedness of a recalcitrant debtor SICA company, it would cause unjustified hardship. Whichever way we look at the matter, there can be no logic in denying legal recourse to a party for proving its debt. In the event that at least the principal

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amount, or a substantial part of it stands admitted, either in the suit or by means of a mention in the Scheme placed before the BIFR, the aggrieved party must be permitted to prove its claim. In holding so, the only prejudice that we can conceive of is incurring expenditure in legal fees. When this is weighed against the interests of a person claiming that the company is indebted to it, the balance tilts in favour of the latter. A holistic reading of Section 22(1) of SICA makes it manifestly clear that Parliament’s intention was to insulate sick companies only against proceedings for winding-up or for execution, or distress or the like or for enforcement of any security or guarantee. In the case in hand, despite several opportunities granted to the Appellant, it has miserably and perhaps deliberately failed to substantiate that the claim mentioned in the Suit has been reflected in the Scheme placed before the BIFR but even more poignantly, that a scheme was, in fact, pending before BIFR. If an Appeal is pending, has BIFR failed to grant or has withdrawn registration under SICA. We see the conduct of the Appellant as nothing more than an abuse of SICA.

7. The Apex Court has in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals, (1997) 10 SCC 649 enunciated the law in the context of SICA to be that a cessation of legal proceedings would be justified only if the dues in respect of which adjudication is ongoing is also included in or within the contemplation of the Scheme presented to BIFR. Their Lordships had analysed and distinguished its previous decisions in Gram Panchayat v. Shree Vallabh Glass Works Limited, (1990) 2 SCC 440 as well as Maharashtra Tubes Ltd. v. State of Industrial and Investment Corporation of Maharashtra Ltd., (1993) 2 SCC 144 on the reasoning that in those cases the liability of the sick company had arisen for the first time after the sanction of the Scheme by BIFR….

8. In Sirmor Sudburg Auto Ltd. v. Kuldip Singh Lamba, [1998] 91 Comp. Cas. 727, R.C. Lahoti, J., as the Learned Single Judge of this Court then was, opined that to be entitled to a stay of legal proceedings under Section 22

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of the Act, a mere pendency of the enquiry would not suffice; the claimed dues must be reckoned or included in the sanctioned scheme. A suit for eviction against a sick industrial company is not liable to be stayed under Section 22(1) of the SICA. This decision has been followed by the Division Bench of the Calcutta High Court in Taulis Pharma Ltd. v. Bengal Immunity Ltd., [2002] 108 Comp. Cas. 237. Similar views have also been expressed in Vibgyar Ink Chem (Pvt.) Ltd. v. Safe Pack Polymers Ltd., [1998] 93 Com. Cas. 407, which likewise is a decision of the Division Bench of the Andhra Pradesh High Court which enunciates that “an independent transaction de hors the scheme obviously cannot thus be covered within the ambit of Section 22 of the 1985 Act”.

9. Justice Lahoti’s view has also been followed by a Single Bench of the Calcutta High Court in Fort William Industries Limited v. Usha Bentron Limited, [2002] 108 Comp. Cas.

176. His Lordship, Dr. Mukundakam Sharma, J. has, in the Cement Corporation of India v. Manohar Basin, 82 (1999) DLT 343 : 1999 (51) DRJ 535 observed that since no documentary proof had been furnished to disclose that any scheme stood sanctioned the so-called SICA bar was not attracted. A Single Bench of the Bombay High Court in Special Steels v. Jay Prestressed Products Ltd., [1991] 72 Comp. Cas. 277 has opined that the pivotal question in connection with the current conundrum concerns the assets of the Company and its functioning, and these would not be jeopardized if a civil suit continues. In Hardip Singh v. Income Tax Officer, Amritsar, [1979] 118 ITR 57 (SC) the winding-up petition was allowed to continue and only when the third and final stage of the dissolution of the Company came to be reached, was the moratorium of Section 22 of the SICA enforced.” (Emphasis supplied)

90Copy pinpoint90. The original plaintiff has placed strong reliance upon the decision of a single judge of the Delhi High Court in Sunil Mittal (supra). It was held therein that since the liability was neither admitted nor taken into consideration by any rehabilitation scheme, the suit proceedings

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could not have been adjourned sine die under Section 22(1) of the 1985 Act. The relevant paragraphs are extracted hereinbelow: “21. In view of the aforesaid facts and circumstances of the case, I feel as the FChas not admitted its liability to pay the amount to the tune as claimed by the plaintiff nor such an amount has been reckoned or taken into consideration by any scheme of rehabilitation of the sick defendant company, therefore, the proceedings of the present suit cannot be adjourned sine die. As a matter of fact the defendant has not placed on record any documentary evidence to show that any such scheme has been formulated as yet and if formulated whether the said amount has been taken care of allegedly being owed to the Plaintiff.

22. For the aforesaid reasons, I feel that the application of the Defendant totally misconceived and accordingly, the same is dismissed.” (Emphasis supplied)

91Copy pinpoint91. It has come to our notice that the said decision in Sunil Mittal (supra) was challenged in appeal before a division bench of the Delhi High Court in LML Ltd. v. Sunil Mittal reported in 2013 SCC OnLine Del 1766 wherein the bench set aside the decision and held that Section 22(1) of the 1985 Act would apply to the facts of the case. The bench observed that from the record it was clear that the amount as claimed by the plaintiff in the recovery suit was admittedly covered by the scheme and thus the proceeding was liable to be suspended by application of Section 22(1) of the 1985 Act. Thus, the position of law held in Sunil Mittal (supra), could not be said to have been disturbed, but only its incorrect application to the facts of the specific case was set aside in LML Ltd. (supra).

92Copy pinpoint92. The decision in LML Ltd. (supra), on the contrary, fortifies the interpretation of Section 22(1) as was done in Sunil Mittal (supra) and Saketh India (supra). The relevant paragraph of the decision in LML Ltd. (supra) is extracted hereinbelow: “16. The principle of law is thus unambiguous. Where the amount claimed or the liability sought to be set up is covered under the scheme, Section 22(1) will be attracted and there would be an automatic suspension of all legal

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proceedings including a suit for recovery of money. In the present case, the amount Rs. 21,74,490.88 is admittedly a part of the DRS pending before the BIFR. The debt of Rs. 3,00,000/- on account of sales tax dues, the petitioner admits as his liability. Even if this amount is not permitted to be adjusted at this stage as has been pointed out by the learned counsel for the respondent, keeping in view the wide import of the language of Section 22 of the said Act there can be no question of continuing with the suit proceedings. It also cannot be lost sight of the fact that the parties were maintaining a running account; payments were being made from time to time; it would thus not be possible to segregate the element of debt since the question would be whether the debt due to the plaintiff is correctly reflected or a lesser amount is in fact due to him. The language of Section 22 would take into its sweep a situation even where if the full amount is not a part of the DRS. The question of continuation of the suit would not arise.” (Emphasis supplied)

93Copy pinpoint93. In M/s Haryana Steel & Alloys Ltd. v. M/s Transport Corporation of India reported in (2012) SCC OnLine Del 2140 it was held that the mere contention of the sick company unsubstantiated by any material indicating that the amount forming subject-matter of the recovery suit is covered under the scheme, would not be sufficient to bring the company under the protective ambit of Section 22(1) of the Act. The relevant paragraphs of the said decision are extracted thus: “11. However, there is another dimension to the said embargo placed on filing of the suit for recovery against a company when the proceedings are pending under the SICA, which is the necessity of the inclusion of the dues payable by the company to the plaintiff in the scheme formulated before the BIFR. It is a settled legal position that it is not by mere pendency of an enquiry under Section 16 of the said Act or preparation of the scheme thereof being under consideration or even filing of an appeal under section 25 before the appellate authority that by itself would entitle the appellant for the said statutory injunction against

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the respondent/plaintiff as the benefit of the prohibition or embargo created under section 22 of the Act would come into operation only where the appellant/defendant has disclosed before the Court, that the amounts claimed by the respondent/plaintiff have been duly shown and disclosed in the scheme formulated and laid before the BIFR. The Apex Court in the case of Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals, (1997) 10 SCC 649 enunciated the law to hold that a cessation of legal proceedings would be justified only if the dues in respect of which adjudication is ongoing is also included in the contemplation of scheme presented by BIFR… xxx xxx xxx

14. In the light of the above settled legal position, analyzing the facts of the case at hand, it is manifest that no material was placed on record by the appellant to show that the amount in respect of which the respondent laid its claim in the said recovery suit was reflected in the scheme laid before the BIFR. The only contention raised by the appellant before the trial court as well as before this Court was that the prohibition or embargo as envisaged in Section 22 would come into operation immediately once the defendant brings to the notice of the Court that an inquiry under Section 16 is pending before the Board or an appeal is pending relating to the said inquiry before the Appellate Authority. Having failed to place any such material on record, this Court is of the clear view that the bar or embargo envisaged under Section 22 of the Act will not apply to the facts of the present case as the appellant cannot take the advantage of the said provision merely because an inquiry under Section 16 was pending before the BIFR or an Appeal under Section 25 against the order of BIFR was pending before the AAIFR.” (Emphasis supplied)

94Copy pinpoint94. In Kusum Products Ltd. v. Hitkari Industries Ltd. reported in 2014 SCC OnLine Del 4926, a learned Single Judge of the Delhi High Court, relying upon the decision in Raheja Universal (supra) held that a suit for recovery of money simpliciter will not be liable

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to be suspended under Section 22(1) of the 1985 Act. It was observed thus: “3. The aforesaid paragraphs show that the proceedings for which prior permission is required under Section 22 of SICA are proceedings in the nature of execution, distress or like. It is not every suit or every suit for recovery which automatically becomes proceedings in the nature of execution, distress or like, and only such suits of recovery where there would be proceedings which cause liquidation of assets of a sick company, would be those suits which would be hit by the bar of Section 22 of SICA.

4. In the present case, the suit for recovery of money is a suit for recovery of money simplicitor. Counsel for the plaintiff does not press the interim applications under Order 38 Rule 5 of Code of Civil Procedure, 1908 (CPC) and Order 39 Rules 1 and 2 CPC. Accordingly, in the subject suit, there is no threat to the liquidation of the assets of the sick company and therefore no prior permission is required under Section 22 of SICA.” (Emphasis supplied)

95Copy pinpoint95. In FMI Investment Pvt. Ltd. v. Montari Industries Ltd. and Another reported in (2012) SCC OnLine Del 5354, the High Court undertook a comprehensive analysis of the dictum as laid in Raheja Universal (supra) and Saketh India (supra) and held thus: “6. The salient conclusions which can be arrived at from reading of the aforesaid paras in the case of Raheja Universal (supra) are : - (i) The proceedings which are affected by Section 22(1) are proceedings in the nature of execution, distress or the like. (ii) It depends on facts of each case as to whether the suit is hit by Section 22 i.e. all suits including of recovery, are not hit by Section 22(1). (iii) Only those suits which have the effect of execution, distress or like action against the properties of the sick company are hit by Section 22 i.e. where a suit is simply for recovery of moneys, and the properties of a sick

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company are not threatened by the proceedings including interim proceedings such as appointment of receiver, execution, distress or the like, such suits can continue without permission under Section 22.

7. Learned counsel for the defendant no. 2 sought to place reliance on the following three judgments to argue that permission under Section 22 is a sine qua non. (i) Managing Director, Bhoruka Textiles Ltd. v. Kashmiri Rice Industries (2009) 7 SCC 521; (ii) Tata Davy Ltd. v. State of Orissa (1997) 6 SCC 669; (iii) Dr. B.K. Modi v. Morgan Securities and Credits Pvt. Ltd. and Morgan Securities and Credits Pvt. Ltd. v. Dr. B.K. Modi MANU/DE/2779/2012

8. In my opinion, all the three judgments, which have been cited on behalf of defendant no. 2 have no application because the legal position is sufficiently elaborated by the Supreme Court in the judgment of Raheja Universal (supra).

9. None of the aforesaid judgments cited on behalf of defendant no. 2 deal with the issue of interpretation of Section 22 of SICA as has been done by the Division Bench of three Judges in the case of Raheja Universal (supra) and which holds that unless the suit proceedings are in the nature of ‘execution, distress or the like’, the suit can continue. The judgments relied upon by the defendant no. 2 are judgments which simply hold that once a company is a sick company, permission is required under Section 22 of the SICA, however, none of the judgments cited on behalf of the defendant no. 2 deal with the proposition as incorporated in the later judgment of the Division Bench of three Judges of the Supreme Court in the case of Raheja Universal (supra). Accordingly, it is held that the suit is maintainable.

10. In the present suit for recovery it cannot be said that the suit is of a nature which has impact of or threat to the properties of the defendant No. 1 sick company to affect the scheme of revival. The suit is a simple suit for

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recovery under Order 37 CPC not having proceedings, whether interim or final, of execution, distress or the like and hence the suit is not hit by Section 22 of SICA. So far as defendant No. 2/guarantor is concerned, the suit against him will not surely hit any assets of the sick company and hence is not barred under Section 22 of SICA.” (Emphasis supplied)

96Copy pinpoint96. In one recent decision of the Delhi High Court in Chhattisgarh Distilleries Ltd. v. Percept Advertising Limited reported in 2023 SCC OnLine Del 6417, while considering the question on applicability of Section 22(1) of the 1985 Act, it was held thus: “8. It is well settled that there was legal duty cast upon the appellant/defendant to bring it to the notice of the Court that it had qualified for the protection under the SICA, and this obligation was not discharged. There is no gainsaying that the aforesaid provision has been interpreted in umpteen number of cases decided by the Apex Court as well as this Court. In the cited case of Saketh India Limited (supra), it was observed that the phrase “recovery of money” must be construed ejusdem generis and accordingly recovery proceedings in the nature of execution or any other coercive enforcement that has been ordained to be not maintainable. There is nothing in the said provision so as to hold the legal proceedings to be not maintainable, or liable to be halted, even if the debt sought to be proved in the plaint has not been admitted. Furthermore, it was observed that there can be no logic in denying legal recourse to a party for proving its debt. The said decision was relied upon by this Court again in the decision of Ralson Industries Ltd. (now known as Da Rubber Industries Ltd) (supra), wherein it was categorically held that the proceedings that can be halted by invoking Section 22 of the SICA should be in the nature of execution, distress or the like.” (Emphasis supplied)

97Copy pinpoint97. From the aforesaid discussion, the position of law on the first issue before us appears to be that for the applicability of Section 22(1) of the 1985 Act, three aspects need to be considered –

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I. First, an inquiry under Section 16 of the 1985 Act must be pending; or any scheme referred to in Section 17 of the 1985 Act must be under preparation or consideration or a sanctioned scheme must be under implementation; or an appeal under Section 25 of the 1985 Act must be pending – in relation the company against whom the legal proceedings sought to be suspended have been initiated. II. Secondly, the proceedings must be one from amongst the six types as described in paragraph 65 of this judgment, or of a similar nature, i.e. ejusdem generis to the said six types of proceedings. III. Thirdly, the proceedings must have the effect of threatening the assets of the sick company and interfering with the formulation, consideration, finalisation or implementation of the scheme.

98Copy pinpoint98. Applying the aforesaid tests to the facts of the present case, we have already observed that requirement (i) is fulfilled. The proceeding in question being a suit for recovery of money, requirement (ii) is also satisfied. However, we are of the considered opinion that the third requirement is not fulfilled. We say so because the suit for recovery was not of a nature which could have proved to be a threat to the properties of the defendant sick company or would have adversely impacted the scheme of revival. The suit was a simple suit for recovery of money towards the dues arising under the alleged illegal deductions under the contract. This cannot be said to be a proceeding in the nature of execution, distress or the like and hence the suit was not hit by Section 22(1) of the 1985 Act.

99Copy pinpoint99. By no stretch of imagination could it be said that the legislature intended to include even the proceedings for the adjudication of the liabilities not admitted by a sick company within the protective ambit of Section 22(1) of the 1985 Act. 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. In the case of Jay Engineering (supra), it was rightly observed by this Court in the context of arbitration proceedings under the 1993 Act for the adjudication of claims, that while the execution of an award would definitely be suspended under Section 22(1) of the 1985

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Act, the adjudicatory process for arriving at such an award cannot be said to be suspended by the said provision. This position also seems to be justified in light of the fact that the proceedings before the BIFR under the 1985 Act were generally long-drawn and time consuming and it would subserve the interest of justice if a party was prevented even from proving the debt/liability of the sick company for the entirety of that lengthy period.

100Copy pinpoint100. We may also look at Section 22(1) of the 1985 Act by applying the mischief rule of interpretation. G.P. Singh in his authoritative commentary on the interpretation of statutes describes the mischief rule of construction as follows: “The rule which is also known as ‘purposive construction’ or ‘mischief rule’, enables consideration of four matters in construing an Act: (i) What was the law before the making of the Act, (ii) What was the mischief or defect for which the law did not provide, (iii) What is the remedy that the Act has provided, and (iv) What is the reason of the remedy. The rule then directs that the courts must adopt that construction which “shall suppress the mischief and advance the remedy.””

101Copy pinpoint101. Applying the aforesaid rule to Section 22(1) of the Act, we find that there was a vacuum in the legal framework to deal with sick industrial companies and provide ameliorative steps for their revival. The 1985 Act was thus enacted to fill in this vacuum. The mischief which was sought to be dealt with by the enactment of Section 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. Finally, it can be said that the reason for the remedy was to shield the formulation and implementation of the revival scheme from any impediments thereby maximising the chances of revival of sick company, which was the ultimate object sought to be achieved by the Act.

102Copy pinpoint102. The original defendants have placed strong reliance on 3 decisions of this Court in Jay Engineering (supra), Bhoruka Textiles (supra) and

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Tata Motors (supra) respectively. We have discussed in the foregoing parts of this judgment as to how this Court in Jay Engineering (supra) expressly observed that it was not the adjudicatory process, but the execution of an award which would be restricted by Section 22(1) of the 1985 Act. This judgment, thus, only furthers the line of reasoning we have adopted to negate the contention of the original defendants on the applicability of Section 22(1) of the 1985 Act.

103Copy pinpoint103. The decision in Bhoruka Textiles (supra) dealt with the specific facts in that case and should be read alongwith the decision in Raheja Universal (supra) wherein the scope of Section 22(1) of the 1985 Act was considered in detail by a three-Judge bench. We would also like to observe that the reliance placed by this Court in Bhoruka Textiles (supra) on the decision in Tata Motors (supra) seems to be misplaced. The relevant paragraph of Bhoruka Textiles (supra) is reproduced hereinbelow: “10. Section 22 of the Act must be interpreted giving a plain meaning to its contents. An enquiry in terms of Section 16 of the Act by the Board is permissible upon receipt of a reference. Thus, reference having been made on 27- 12-2001 and the suit having been filed on 17-12-2002, the receipt of a reference must be held to be the starting period for proceeding with the enquiry.

11. The effect of the provisions of the Act has been considered by a three-Judge Bench decision of this Court in Tata Motors Ltd. v. Pharmaceutical Products of India Ltd. [(2008) 7 SCC 619] wherein it, in no uncertain terms, held that SICA is a special statute and, thus, overrides other Acts like the Companies Act, 1956, stating: (SCC p. 635, paras 31-33) “31. SICA furthermore was enacted to secure the principles specified in Article 39 of the Constitution of India. It seeks to give effect to the larger public interest. It should be given primacy because of its higher public purpose. Section 26 of SICA bars the jurisdiction of the civil courts.

32. What scheme should be prepared by the operating agency for revival and rehabilitation of the sick

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industrial company is within the domain of BIFR. Section 26 not only covers orders passed under SICA but also any matter which BIFR is empowered to determine.

33. The jurisdiction of the civil court is, thus, barred in respect of any matter for which the Appellate Authority or the Board is empowered. The High Court may not be a civil court but its jurisdiction in a case of this nature is limited.”

12. If the civil court’s jurisdiction was ousted in terms of the provisions of Section 22 of the Act, any judgment rendered by it would be coram non judice. It is a well-settled principle of law that a judgment and decree passed by a court or tribunal lacking inherent jurisdiction would be a nullity. In Kiran Singh v. Chaman Paswan [AIR 1954 SC 340] this Court held: (AIR p. 342, para 6) “6. … It is a fundamental principle well established that a decree passed by a court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties.” (See also Chief Engineer, Hydel Project v. Ravinder Nath [(2008) 2 SCC 350 : (2008) 1 SCC (L&S) 940], SCC p. 361, para 26.)”

104Copy pinpoint104. A perusal of the above indicates that in Tata Motors (supra), it was Section 26 and not Section 22 of the 1985 Act which was under consideration. As opposed to Section 26 of the Act, which bars the jurisdiction of the civil courts in respect of those matters for which the BIFR or the AAIFR are empowered, Section 22 only places a temporary embargo on the initiation or continuation of legal proceedings in respect of certain matters mentioned therein. Further,

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unlike Section 22, where the said suspension can be revoked by seeking express permission of the BIFR or the AAIFR, no such permission can be sought under Section 26 of the 1985 Act. Again, in any view of the matter, the adjudication and determination of a contested liability under a contract is undoubtedly the domain of the civil court or an arbitral tribunal and not that of the BIFR or the AAIFR. v. ISSUE NO. 2: Whether the High Court was correct in granting 24% Compound Interest on the Principal Decretal Amount in favour of the original Plaintiff?

105Copy pinpoint105. The High Court in its impugned judgment considered, as a separate issue, whether the original plaintiff was entitled to claim 24% compound interest from the original defendants on the delayed payments. a. Concept of Interest

106Copy pinpoint106. When interest is awarded by the Court, our normal feeling is that it is so awarded by way of penalty or punishment. But interest in all cases is not granted by way of penalty or punishment. In this regard, reference may be made to the decision of this Court in the case of Alok Shanker Pandey v. Union of India, reported in 2007 AIR (SC) 1198, wherein the concept of grant of interest has been explained in the following manner: “It may be mentioned that there is misconception about interest. Interest is not a penalty or punishment at all, but it is the normal accretion on capital. For example, if had to pay B a certain amount, say ten years ago, but he offers that amount to him today, then he has pocketed the interest on the principal amount. Had A paid that amount to ten years ago, B would have invested that amount somewhere and earned interest thereon, but instead of that A has kept that amount with himself and earned interest on it for this period. Hence equity demands that A should not only pay back the principal but also interest thereon to B.”

107Copy pinpoint107. The above-noted decision of this Court makes it clear that interest on the delayed payment of the claim amount accrues due to the continuing wrong committed by the wilful withholding of the payment towards the claim, resulting in a continuous injury until such payment is made, or in other words, until the claim is realised.

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108Copy pinpoint108. The High Court relied upon the provisions of the 1993 Act to hold that as per Sections 4 and 5 respectively of the said legislation, the original plaintiff, which was a small-scale industrial undertaking, was entitled to claim compound interest @ 24% per annum from the original defendants. As a result, the High Court set aside the decree of the trial court which granted 12% simple interest in favour the original plaintiff.

109Copy pinpoint109. The original defendants are aggrieved by the awarding of 24% interest in favour of the original plaintiff, which they contend has resulted in the principal decretal amount getting inflated exorbitantly. The original plaintiff, on the other hand, has argued that the impugned judgment of the High Court insofar as it deals with the issue of interest cannot be said to suffer from any infirmity and was arrived at after due consideration of relevant material viz. the Handbook of Statistics of Indian Economy published by the Reserve Bank of India, etc. and after hearing the parties at length.

110Copy pinpoint110. The original plaintiff has further submitted that the High Court considered the floor rate charged by the SBI for the financial year 1993-1994, which was 19%, as observed under the Table 74 on Structure of Interest Rates in the Handbook of Statistics of Indian Economy published by the Reserve Bank of India.

111Copy pinpoint111. We shall briefly consider the object and scope of the 1993 Act for a better understanding of the issue before us. The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Ordinance, 1992 was promulgated by the President of India on 23.09.1992. To replace this ordinance, the 1993 Act was enacted on 02.04.1993 and came into force with retrospective effect from 23.09.1992. Subsequently, the 1993 Act was repealed by the Micro Small and Medium Enterprises Development Act, 2006 (“MSMED Act, 2006”). The statement of objects and reasons to the 1993 Act reads as under: “A policy statement on small scale industries was made by the Government in Parliament. It was stated at that time that suitable legislation would be brought to ensure prompt payment of money by buyers to the small industrial units.

2. Inadequate working capital in a small scale or an ancillary industrial undertaking causes serious

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and endemic problems affecting the health of such undertaking. Industries in this sector have also been demanding that adequate measures be taken in this regard. The Small Scale Industries Board, which is an apex advisory body on policies relating to small scale industrial units with representatives from all the States, governmental bodies and the industrial sector, also expressed this view. It was, therefore, felt that prompt payments of money by buyers should be statutorily ensured and mandatory provisions for payment of interest on the outstanding money, in case of default, should be made. The buyers, if required under law to pay interest, would refrain from withholding payments to small scale and ancillary industrial undertakings.

3. An Ordinance, namely, the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Ordinance, 1992, was, therefore, promulgated by the President on the 23rd September, 1992.

4. The Bill seeks to replace the said Ordinance and to achieve the aforesaid objects.”

112Copy pinpoint112. It is evident from the aforesaid statement of objects and reasons that the legislature desired to bring about a legislation which would ensure prompt payment of money to small scale units, as the absence of working capital may have severe impacts on the functioning of small scale and ancillary industries. The 1993 Act envisaged that there should be minimal delay in payments to small scale units. Section 2 of the 1993 Act provides for the certain important definitions which are reproduced hereinbelow: “(b) “appointed day” means the day following immediately after the expiry of the period of thirty days from the date of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier; Explanation.—For the purposes of this clause,— (i)“the day of acceptance” means,— (a) the day of the actual delivery of goods or the rendering of services; or

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(b) where any objection is made in writing by the buyer regarding acceptance of goods or services within thirty days from the day of the delivery of goods or the rendering of services, the day on which such objection is removed by the supplier; (ii) “the day of deemed acceptance” means, where no objection is made in writing by the buyer regarding acceptance of goods or services within thirty days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of services; (c) “buyer” means whoever buys any goods or receives any services from a supplier for consideration; xxx xxx xxx (f) “supplier” means an ancillary industrial undertaking or a small scale industrial undertaking holding a permanent registration certificate issued by the Directorate of Industries of a State or Union territory and includes,— (i) the National Small Industries Corporation, being a company, registered under the Companies Act, 1956 (1 of 1956); (ii) the Small Industries Development Corporation of a State or a Union territory, by whatever name called, being a company registered under the Companies Act, 1956 (1 of 1956).]”

113Copy pinpoint113. Section 3 of the 1993 Act provides for the liability of the buyer to make payment to the small-scale industries whereas Section 4 and 5 respectively of the said Act pertain to the date from which and the rate at which interest is payable. Section 5 of the 1993 Act also stipulates that the buyer shall be liable to pay compound interest. Sections 3, 4 and 5 respectively of the 1993 Act, as existing at the time when the dispute between the parties arose, are reproduced thus: - “3. Liability of buyer to make payment - Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or

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before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day.

4. Date from which and rate at which interest is payable - Where any buyer fails to make payment of the amount to the supplier, as required under section 3, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay interest to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at such rate, which is five per cent points above the floor rate for comparable lending. Explanation: For the purposes of this section, “floor rate for comparable lending” means the highest of the minimum lending rates charged by scheduled banks (not being co- operative banks) on credit limits in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act, 1949 (10 of 1949).

5. Liability of buyer to pay compound interest - Notwithstanding anything contained in any agreement between a supplier and a buyer or in any law for the time being in force, the buyer shall be liable to pay compound interest (with monthly interest) at the rate mentioned in section 4 on the amount due to the supplier.”

114Copy pinpoint114. On a perusal of Section 3 of the 1993 Act, we find that where any supplier supplies any goods, the buyer shall make payment on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day. In the instant case, as per the terms of the NIT, payment was to be made within 20 days from the receipt of the goods.

115Copy pinpoint115. As discussed in the preceding paragraphs of this judgment, the High Court has awarded 24% compound interest on the amounts due to the original plaintiff from the date the amounts were determined to have become due till the date of their realisation by the original plaintiff. While there is no doubt that the rate of interest applicable to the dues of the original plaintiff as determined by the High Court

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is correct, we think it is necessary to examine if the compound interest can be said to have continued to accrue even when FCIL was declared a sick company and was awaiting its revival before the BIFR. In other words, it is not the rate of interest but the period for which it is applicable, is the question that is to be determined.

116Copy pinpoint116. We have discussed at length in the foregoing paragraphs of the judgment the object behind the enactment of the 1985 Act. Sickness of industrial companies was considered to be a problem that affected the country at large, and thus the 1985 Act was enacted as per the policy directions contained in Article 39 of the Constitution to provide, inter alia, ameliorative steps for the revival of sick companies, and for the expeditious detection of potentially sick companies. In particular, we would like to mention that Section 19 of the 1985 Act provides that the scheme for rehabilitation of a sick company may provide for financial assistance to the sick company by way of loans, advances, reliefs or concessions or sacrifices from the Central Government, a State Government, a public financial institution etc.

117Copy pinpoint117. In the present case, in pursuance of Section 19 of the Act, a number of decisions were taken by the CCEA on 09.05.2013 including the waiver of loans and interest thereon by the Central Government which ran into thousands of crores. As per the document F.No. 18055/13/2012-FCA-1 titled “Gist of the CCEA decisions dated 09th May, 2013” published by the Ministry of Chemicals and Fertilizers, it appears that the dues of the major unsecured creditors were settled at 30% of their dues as on 31.03.2003. Further, the dues of some other parties were settled without any interest or penalty, as otherwise the entire process of revival might have gotten derailed.

118Copy pinpoint118. We have also discussed how Section 22(1) of the 1985 Act suspends any legal proceedings of the nature specified therein if they can potentially interfere with the consideration, sanction or execution of the rehabilitation scheme. The intention behind the sanction and execution of a rehabilitation scheme, without a doubt, is to increase the chances of the revival of the sick company in public interest.

119Copy pinpoint119. Thus, on one hand we have the beneficial provisions of the 1985 Act, enacted to maximise the chances of revival of sick industrial companies, while on the other, we have the 1993 Act, which was enacted with the intention to ensure that small-scale industries are paid their dues in time. This object of the 1993 Act was sought to be

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achieved by providing a high interest rate, with monthly compounding, so as to act as a deterrent for the buyers.

120Copy pinpoint120. A preliminary contention was raised by the original defendants that the original plaintiff chose to institute a civil suit for recovery of money, rather than following the process prescribed under Section 6 of the 1993 Act, which provides for the referring of a dispute arising under the 1993 Act to arbitration before the Industry Facilitation Council, and thus for this reason, the suit for recovery, which is expressly suspended under Section 22(1) of the Act, should be held as not maintainable. It was also argued that even otherwise no interest should be granted on the amount claimed as due since the mechanism prescribed under Section 6(2) of the 1993 Act was not followed.

121Copy pinpoint121. Section 6 of the 1993 Act reads as follows: “6. Recovery of amount due - (1) The amount due from a buyer, together with the amount of interest calculated in accordance with the provisions of sections 4 and 5, shall be recoverable by the supplier from the buyer by way of a suit or other proceeding under any law for the time being in force. (2) Notwithstanding anything contained in sub-section (1), any party to a dispute may make a reference to the Industry Facilitation Council for acting as an arbitrator or conciliator in respect of the matters referred to in that sub-section and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such dispute as if the arbitration or conciliation were pursuant to an arbitration agreement referred to in sub-section (1) of section 7 of that Act.”

122Copy pinpoint122. We do not find any force in this contention of the original defendants. Section 6 merely provides that for the purpose of recovery of the amounts due under the 1993 Act, a supplier may make a reference to the Industries Facilitation Council, which is established under Section 7A of the 1993 Act. First, at the time of the institution of the suit by the original plaintiff, the Industries Facilitation Councils didn’t exist as the provision for their establishment was only brought in vide an amendment in 1998. Secondly, even otherwise, Section 6(2) of the 1993 Act merely provides for an alternate avenue to the supplier in

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addition to a suit or any other legal proceedings as mentioned in Section 6(1) of the 1993 Act.

123Copy pinpoint123. It is also pertinent to mention that in the absence of the express permission of the BIFR, Section 22(1) of the 1985 Act suspends any legal proceedings in the nature of execution during the pendency of the scheme before the BIFR, as execution would necessarily result in negatively impacting the assets of a sick company, thereby affecting the preparation, sanction or implementation of scheme and as a net effect, would bring down the chances of revival of the sick company.

124Copy pinpoint124. In the present case, the suit was decreed in favour of the original plaintiff by the trial court vide its judgment dated 19.09.2001. However, while the adjudication of the suit of the original plaintiff could not have been said to be barred under Section 22(1) of the 1985 Act as it was for the mere determination of liability of the parties inter-se, the execution of decree obtained as a result thereof was expressly suspended during the period as mentioned in the said provision, unless the requisite permission from the BIFR or the AAIFR could be obtained.

125Copy pinpoint125. Interest of justice requires that both the 1985 Act and the 1993 Act, which are in the nature of beneficial enactments, should be read harmoniously so as to impart a meaningful construction to the language of each of the enactments. It was held in Jay Engineering (supra) on the interplay between the two Acts as follows: “13. The 1993 Act was enacted to provide for and regulate the payment of interest on delayed payments to small- scale and ancillary industrial undertakings and for matters connected therewith.

14. The provisions of the 1993 Act, therefore, do not envisage a situation where an industrial company becomes sick and requires framing of a scheme for its revival.” (Emphasis supplied)

126Copy pinpoint126. In our opinion, it would defy logic to hold that even for the period when the principal decretal amount awarded by the civil court under a decree could not have been realised in lieu of the suspension of execution proceedings, interest would continue to mount on the principal decretal amount. Thus, while there is a stay on proceedings in the nature of distress and execution, etc. against the properties of

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the sick company, to safeguard its assets, awarding interest for that very same period, though not expressly barred under any provision of the Act, could not have been the intention of the legislature.

127Copy pinpoint127. Any other interpretation would only lead to an absurd result that as soon as a sick company is revived after the steps taken by the BIFR, and concessions, financial support, etc. provided by the government, it would be prone to the liability of having to pay exorbitant interest that would have accrued on any decree which can be put to execution after the end of BIFR proceedings.

128Copy pinpoint128. The net effect would be that a freshly revived sick company would potentially be saddled with huge amounts, as has happened in the present case because of the impugned judgment, and be at a risk of being rendered sick again, thus defeating the very purpose of the 1985 Act.

129Copy pinpoint129. A two-judge bench of this Court, in a recent decision in Modi Rubber Ltd. v. Continental Carbon India Ltd., reported in 2023 SCC OnLine SC 296 decided the issue as to whether it was open to an unsecured creditor to not accept the scaled down value of its dues, as computed in the rehabilitation scheme, and wait for the revival of the sick company to recover its debt with interest post the rehabilitation. This Court, after an exhaustive consideration of the object of the 1985 Act, answered the issue in the negative and held as follows: “40. The short question, which is posed for the consideration of this Court is:— “Whether on approval of a scheme by the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985, an unsecured creditor has the option not to accept the scaled down value of its dues, and to wait till the scheme for rehabilitation of the respondent - sick company has worked itself out, with an option to recover the debt with interest post such rehabilitation?” xxx xxx xxx

49. Thus, the primary concern of the Board would be the revival of the sick company and to save the sick company from winding up. That is why with a view to see that there

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is no impediment in framing the rehabilitation scheme and to get out the sick company from sickness. Section 22 provides for suspension of legal proceedings, contracts etc. On a bare reading of Section 22 and Section 22A of SICA, it appears that these two provisions primarily ensure that the scheme prepared by BIFR does not get frustrated because of certain other legal proceedings and to prevent untimely and unwarranted disposal of the assets of the sick industrial company. These sections clearly state certain restrictions which will impact upon the implementation of the scheme as well as on the assets of the company. xxx xxx xxx

53. Keeping in mind the statement of objects and reasons for enactment of SICA, 1985 and the powers exercised by the BIFR and the primary concern to revive the sick industry for which the rehabilitation scheme is to be framed under Section 18, the question posed is required to be considered. xxx xxx xxx

56. The operating agency is defined under Section 3(i) and it means any public financial institution, State-level institution, scheduled bank or any other person as may be specified by general or special order as its agency by the Board. No other persons including the unsecured creditors comes into picture like preparing the scheme under Section 18. Section 18 of the SICA does not provide that at the time of preparing of the scheme under Section 18 or when it is sanctioned by the Board, the unsecured creditors are required to be heard. The only provision for the consent required is Section 19 and the agency/ person, who is required to give the financial assistance, its consent is required. Once the rehabilitation scheme/ scheme under Section 18 prepared by the operating agency is sanctioned by the BIFR, which may include the scaling down the value of dues of the unsecured creditors, the same shall bind all, otherwise the rehabilitation scheme shall not be workable at all and the object and purpose of enactment of the SICA, 1985 will be frustrated. If some

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persons/unsecured creditors and/or even the labourers are permitted to get out of the purview of the scheme and thereafter permitting such or some of the unsecured creditors to wait till the scheme for rehabilitation of the sick company has worked itself out, in that case, the scheme shall not be workable at all. To make the company viable, the concerned persons including the unsecured creditors have to sacrifice to some extent otherwise the revival efforts shall fail. xxx xxx xxx

59. If the submission on behalf of the unsecured creditors, which has been accepted by the High Court in the case of Continental Carbon India Ltd. (supra) that an unsecured creditor can opt out of the scheme sanctioned by the BIFR under the SICA, 1985 and is allowed not to accept the scaled down value of its dues and may wait till the scheme for rehabilitation of the sick company has worked itself out, with an option to recover the debt post such rehabilitation is accepted/allowed, in that case, the minority creditors may frustrate the rehabilitation scheme, which may frustrate the object and purpose of enactment of SICA, 1985. xxx xxx xxx

61. Thus, minority creditors and that too some unsecured creditors cannot be permitted to stall the rehabilitation of the sick company by not accepting the scaled down value of its dues. Unless and until there is a sacrifice by all concerned, including the creditors, financial institutions, unsecured creditors, labourers, there shall not be any revival of the sick industrial company/company.

62. Now, so far as the submission on behalf of the unsecured creditors that the unsecured creditors should have an option not to accept the scaled down value of its dues and to wait till the scheme for rehabilitation of the sick company has worked itself out, with an option to recover the debt post such rehabilitation is concerned, the same has no substance and cannot be accepted. It is required to be noted that in a given case, because of

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the scaling down of the value of the dues of the creditors, the company survives. The company has survived in view of the rehabilitation scheme because of the sacrifice/ scaling down the value of the dues of the creditors including the financial institutions. How such a benefit can be permitted to be given to the unsecured creditors, who does not accept the scaled down value of its dues. Such an unsecured creditor cannot be permitted to take the benefit of the revival scheme, which is at the cost of other creditors including the financial institutions and even the labourers.

63. Now, so far as the view taken by the High Court that the unsecured creditor had an option not to accept the scaled down value of its dues and can wait till the scheme for rehabilitation of the company has worked itself out with an option to recover the debt with interest post such rehabilitation is accepted, in a given case, the sick company, which has been able to revive because of the scaling down the value of the dues, may again become sick, if the entire dues of the unsecured creditors are to be paid thereafter. It may again lead to becoming such a revived company again as a sick company. If such a thing is permitted, in that case, it will again frustrate the object and purpose of enactment of the SICA, 1985.

64. Now, so far as the submission on behalf of the unsecured creditors that to compel the unsecured creditors to accept the scaled down value of its dues would tantamount to and would be violative of Article 300A of the Constitution of India is concerned, the same has also no substance. Scaling down the value of the dues is under the rehabilitation scheme prepared under Section 18 of the SICA, which has a binding effect on all the creditors. Therefore, the same cannot be said to be violative of Article 300A of the Constitution of India. The law permits framing of the scheme taking into consideration and to provide the measures contemplated under Section 18, therefore, the rehabilitation scheme which provides for scaling down the value of dues of the creditors/unsecured creditors and even that of the labourers cannot be said to be violative

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of Article 300A of the Constitution of India as submitted on behalf of the unsecured creditors.

65. In view of the above and for the reasons stated above, the view taken by the High Court of Delhi in Continental Carbon India Ltd. (supra) that on approval of a scheme by the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985, the unsecured creditors has an option not to accept the scaling down value of its dues and to wait till the rehabilitation scheme of the sick company has worked itself out with an option to recover the debt with interest post such rehabilitation is erroneous and contrary to the scheme of SICA, 1985 and the same deserves to be quashed and set aside and is accordingly quashed and set aside.” (Emphasis supplied)

130Copy pinpoint130. It is clear from the aforesaid observations of this Court that the revival of a sick industry should be given utmost priority and any interpretation which may result in a newly revived company becoming sick again should be avoided at all costs. In the case on hand, the decree in favour of the original plaintiff was not a part of the scheme of rehabilitation approved by the BIFR. Had it been so, it is nothing but obvious that the scheme would have proposed to settle the dues of the original plaintiff at a scaled down value, since a similar approach was adopted in the scheme to settle the dues of all the other creditors. In that scenario, the original plaintiff would not have had any other option but to accept the scaled down value and settle its dues as per the dictum in Modi Rubber (supra).

131Copy pinpoint131. The decree awarded by the trial court was contested by both the parties before the High Court. No material was placed before us to show whether any steps were taken by the original plaintiff to obtain the permission of the BIFR for the execution of the decree of the trial court, or for the inclusion of the said decree in the rehabilitation scheme. At the same time, the original defendants too failed to bring anything on record to show if any steps were taken by them for the inclusion of the dues of the original plaintiff in the rehabilitation scheme.

132Copy pinpoint132. Although the facts of the case on hand are different from the facts in Modi Rubber (supra), we are of the opinion that the general principles

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enunciated in that case are equally applicable in the present case. Thus, only for the reason that the dues of the original plaintiff were not a part of the scheme and thus could not be settled at a scaled- down value, it cannot be held that it will now be open for the original plaintiff to recover its dues along with compound interest for the entire period in a manner that will saddle the defendant company with enormous liability, thereby possibly rendering the entire process of its revival futile. This, in our view, could never have been the object of the 1985 Act and the provisions of the 1993 Act thus have to be harmonised so as to give effect to the true object of the 1985 Act.

133Copy pinpoint133. We also had the occasion to look into the decision of a 2-Judge bench of this Court in LML Limited v. Union of India & Others reported in (2014) 13 SCC 375 wherein this Court was considering the purport of Section 19 of the MSMED Act, 2006 which is in pari-materia to the Section 7 of the 1993 Act. The provisions read as under:

MSMED Act, 2006 The 1993 Act “19. Application for setting aside decree, “7. Appeal – award or order. No appeal against No application for setting aside any decree, any decree, award award or other order made either by the or other order shall Council itself or by any institution or centre be entertained by providing alternate dispute resolution services any court or other to which a reference is made by the Council, a u t h o r i t y u n l e s s shall be entertained by anyf court unless the the appellant (not appellant (not being a supplier) has deposited being a supplier) with it seventy-five per cent. of the amount has deposited with in terms of the decree, award or, as the it seventy-five per case may be, the other order in the manner cent. of the amount directed by such court: in terms of the decree, award or, Provided that pending disposal of the as the case may be, application to set aside the decree, award other order in the or order, the court shall order that such manner directed by percentage of the amount deposited shall such court or, as the be paid to the supplier, as it considers case may be, such reasonable under the circumstances of the authority.” case, subject to such conditions as it deems necessary to impose.”

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134Copy pinpoint134. In the aforesaid case, the petitioner therein, having become a sick company, filed a reference to the BIFR under Section 15(1) of the 1985 Act. Around the same time, one of the respondents filed a claim petition before the Industries Facilitation Council under Section 6 of the 1993 Act. The 1993 Act was replaced by the MSMED Act, 2006 during the pendency of the proceedings. While the reference of the company remained pending before the BIFR, the Industries Facilitation Council passed an award in the favour of the said respondent, which the petitioner sought to appeal under the Section 34 of the Arbitration and Conciliation Act, 1996. However, both the District Court and the High Court dismissed the challenge petition for not complying with the Section 19 of the MSMED Act, 2006, which mandates that 75% of the decretal/award amount has to be deposited by the appellant before the appeal can be entertained by the appellate court.

135Copy pinpoint135. However, this Court set aside the dismissal orders and held as follows: “9. Having regard to the above position, we are satisfied that this is not a case where we should go into the legal question noted by us in the beginning of our order. We are satisfied that interest of justice shall be subserved if it is directed that failure to deposit the amount as directed by the District Judge, Kanpur Nagar in its order dated 12-5-2011 would not result in dismissal of the arbitration petition filed by the petitioner under Section 34 of the 1996 Act challenging the award dated 22-12-2008. The said arbitration petition may remain pending with the District Judge until the finalisation of scheme by BIFR under Section 18 of the 1985 Act. We order accordingly.

10. The special leave petition is disposed of as above. Respondent 3 is granted liberty to apply to BIFR to hear it before finalisation of the scheme. We observe that if such an application is made, BIFR shall hear Respondent 3 before finalisation of the scheme or any other order that may be passed by BIFR terminating the proceedings under 1985 Act.” (Emphasis supplied)

136Copy pinpoint136. We would also like to advert to the principle of harmonious construction to understand the interplay between the 1985 Act and the 1993 Act. Simply put, the doctrine of harmonious construction is based on the

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principle that the legislature would not lightly take away from one hand what it had given with the other. Thus, this doctrine provides, that as far as possible, two seemingly conflicting provisions within a statute, or the seemingly conflicting provisions of one statute vis a vis another, should be construed in a manner so as to iron out any conflict.

137Copy pinpoint137. Section 10 of the 1993 Act provides for an overriding effect to the provisions of the said Act to the extent of inconsistency with any other statute. Similarly, Section 32 of the 1985 Act provides overriding effect to the provisions of the said Act except for the enactments specified therein. Dealing with a case involving the apparent conflict between the two statutes containing overriding provisions, this Court in Sarwan Singh v. Shri Kasturi Lal reported in (1977) 1 SCC 750 held as follows: “When two or more laws operate in the same field and each contains a non obstante clause stating that its provisions will override those of any other law, stimulating and incisive problems of interpretation arise. Since statutory interpretation has no conventional protocol, cases of such conflict have to be decided in reference to the object and purpose of the laws under consideration.” (Emphasis supplied)

138Copy pinpoint138. Similarly, in Jay Engineering (supra), it was observed by this Court thus: “31. The endeavour of the court would, however, always be to adopt a rule of harmonious construction.”

139Copy pinpoint139. We would also like to refer to a recent decision of the Madras High Court in Metafilms India Ltd. v. Assistant Commissioner (CT) (Addl.), Amaindakarai Assessment Circle, Chennai and Others reported in (2022) 96 GSTR 272. Although the said decision was rendered in the peculiar facts of the case therein, yet the reasoning behind the same appears to have been similar to the one that we have employed. The relevant parts of the judgment are extracted hereinbelow: “27. Hence, the question would be, in the facts and circumstances of the present case, what is the date, on which, the repayment is due. As we have mentioned

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earlier, the case on hand is very peculiar and appears to have not arisen in any of the earlier litigations and therefore, it requires to be dealt with in a different manner and obviously on such a reasoning, any observation or direction, which we may issue in this judgment, cannot be treated as a precedent.

28. As mentioned above, the appellant was de-registered by the BIFR on February 5, 2013. The first demand notice was issued on March 20, 2013. However, the appellant paid the dues only on April 25, 2015. The question would be, in the facts and circumstances, what would be the date, on which, the repayment of the loan is due.

29. The Department’s contention is that it should be the date, on which, the default occurred. If that is to be reckoned as the date, then an order of cancellation of the agreement followed by recovery proceedings should have been taken by the Department, which admittedly has not been done. This is presumably for the reason that from 2003 to 2013, the appellant was before the Board and it was declared as a sick industrial company and in terms of section 22 of the SICA, the respondent-Department was prohibited from proceeding with any recovery against the appellant and this is a statutory prohibition, which binds the respondent-Department.

30. From the representation given by the appellant to the Government dated August 5, 2014, we find that the Sales Tax Department did not appear before the Board on several dates when the case was heard. Be that as it may, the due date for repayment could have never occurred, in the facts and circumstances, between August 1, 2003 when the appellant was referred to the BIFR and May 31, 2006, the appellant was declared as a sick industrial company till its net worth turned positive and it was discharged from the Board on February 5, 2013.

31. Thus, on facts, we hold that the date, on which, the repayment became due for the appellant’s case shall be fixed on February 6, 2013. Admittedly, the appellant cleared the entire sales tax on April 25, 2015. Hence, for

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the period from February 6, 2013 to April 25, 2015, the appellant is liable to pay interest.” (Emphasis supplied)

140Copy pinpoint140. For the period during which the defendant company was sick and before the BIFR, it cannot be said that the withholding of the payment of the dues of the original plaintiff was wilful and intentional. We say so because first, the liability of the original defendants was disputed and was finally adjudicated only by way of the impugned judgment, much after the BIFR proceedings had come to an end; and secondly, even if the liability of the original defendants was not disputed, or was even acknowledged before the BIFR, recovery of the same could not have been done without the permission of the BIFR in view of the suspension of recovery proceedings by Section 22(1) of the 1985 Act.

141Copy pinpoint141. Thus, in view of our aforesaid discussion, we deem it fit to exclude the period commencing from the date when FCIL was declared to be a sick company under the 1985 Act going up to the date when it was discharged by the BIFR and declared to be no longer a sick industrial company from the purview of the applicability of the interest provision under the 1993 Act. Thus, while the applicability of the 1993 Act to the dues of the original plaintiff is not disputed, such interest shall not be calculated for the period between 06.11.1992 and 27.06.2013. E. CONCLUSION

142Copy pinpoint142. The net effect of the aforesaid discussion and findings is as follows: I. The suit instituted by the original plaintiff before the trial court was not hit by the embargo envisaged under Section 22(1) of the 1985 Act. 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 non-judice. II. The High Court committed no error in awarding 24% interest to the original plaintiff on its dues as per the provisions of the 1993 Act. However, the period during which the defendant company was a sick company as per the 1985 Act should be excluded for the purposes of calculation of interest.

143Copy pinpoint143. As a result, the impugned judgment and order of the High Court is upheld subject to the modification of the period for which interest

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may be granted as discussed aforesaid. To clarify, the interest will be calculated at 24% p.a. with monthly compounding.

144Copy pinpoint144. The appeals are disposed of in the aforesaid terms. The final amount that may be determined in accordance with the final decree shall be paid to the original plaintiff within a period of 4 weeks from today, failing which interest at the rate of 36% p.a. with monthly compounding shall accrue.

145Copy pinpoint145. Pending application(s), if any, shall stand disposed of.

146Copy pinpoint146. Parties to bear their own costs.

Headnotes prepared by: Nidhi Jain Result of the case: Appeals disposed of.