Cement Corporation Of India vs Dr. Narender Gopal Kapahi
- Court
- Delhi High Court
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Reserved on:25 April, 2026
th
Pronounced on:07 July,2026
+ RFA 521/2024, CM APPL. 47224/2024 (stay), CM APPL.
47227/2024 (delay), CM APPL. 70254/2024 (for modification)
CEMENT CORPORATION OF INDIA
having its Registered Offices at:
Core-V, Scope Complex,
7, Lodhi Road,
New Delhi-110003
Also at:
Cement Corporation of India,
CCI House, 87, Nehru Place,
New Delhi-110019. .....Appellant
Through: Mr. Vinay Garg, Mr Puspraj Singh
Parihar, Advocates.
versus
DR. NARENDER GOPAL KAPAHI
S/o Late Sh. Gurbaksh Rai Kapahi,
R/o B-2B/8, Janakpuri,
New Delhi-110058 .....Respondent
Through: Mr. Jaideep Malik, Advocate.
CORAM:
HON'BLE MS. JUSTICE NEENA BANSAL KRISHNA
J U D G M E N T
NEENA BANSAL KRISHNA, J.
1. The present Regular First Appeal under Section 96 read with Order
XLI of the Code of Civil Procedure, 1908 ( hereinafter referred to as
„CPC ’), has been filed on behalf of the Appellant/Defendant, against the
Judgment and decree dated 31.01.2024, of the learned Additional District
Signature Not Verified
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KUMAR BHATT
Signing Date:13.07.2026
10:48:07
RFA 521 /2024 Page 1 of 35
Judge,whereby the Suit of the Plaintiff/Respondent was decreed for mesne
profits at Rs.80/- per sq. ft. in respect of the Suit Property from 01.04.2010
till 29.04.2022, along with simple interest at 9% per annum on the due
amount, from 01.04.2010 till 29.04.2022, and costs.
2. The Plaintiff/Respondent had instituted CS No. 95/22 for seeking
possession of Flat No.1, 4th Floor, CCI House, 87, Nehru Place, New Delhi
(hereinafter referred to as the "Suit Property") , damages and mesne profits
against the Appellant/Defendant, before the learned Additional District
Judge, New Delhi.
3. Briefly stated, the case of the Plaintiff/Respondent was that he is a
senior citizen and the sole owner of the Suit Property, admeasuring 530 sq.
ft., purchased by him in the year 1976 for a consideration of Rs.1,09,710/-.
4. The Plaintiff/Respondent let out the suit property in the year 1979, to
the Appellant/Defendant at a monthly rent of Rs.3.05/- per sq. ft., vide Rent
Agreement, as per which the tenancy was to commence from 15.10.1979 for
an initial period of three years, with an option for renewal thereafter, upon
enhancement of rent by 10%.
5. It is the case of the Plaintiff/Respondent that the initial period of
tenancy expired on 14.10.1982. However, the Appellant/Defendant forced
the Plaintiff/Respondent to extend the lease Agreement under coercion by
stopping payment of monthly rent, taking advantage of the protection
afforded to it under the Delhi Rent Control Act, 1958 (hereinafter referred
to as “DRCA”) . The rent of the Suit Property continued to be enhanced after
every three years and in the year 2006, the rent crossed Rs.3,500/- per
month, thereby taking the tenancy outside the purview of the DRC Act,
1958.
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KUMAR BHATT
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6. The Plaintiff/Respondent claimed that the suit property is situated in
the commercial hub of Delhi, where the prevailing market rent was at least
Rs.70/- per sq. ft., whereas the Plaintiff/Respondent was being paid a
monthly rent of only Rs.3,811.58/-, calculated at Rs.7.19/- per sq. ft. The
Plaintiff/Respondent was additionally required to pay house tax,
maintenance charges, ground rent, sinking fund charges and lease charges to
DDA, thereby leaving him with a meagre sum from the suit property,
despite having invested his lifetime savings therein. The lease had not been
renewed, after the year 2002.
7. In the absence of any registered renewal of rent Agreement, the
tenancy became a month-to-month tenancy, terminable by Notice under
Section 106 of the TPA. Although the lease had already come to an end by
efflux of time, the Plaintiff/Respondent by way of abundant caution, issued a
Legal Notice dated 06.05.2008, terminating the tenancy of the
Appellant/Defendant.
8. Despite several requests and reminder the Appellant/Defendant failed
to reply to the said Notice. A reminder was thereafter sent through the
Plaintiff/Respondent's Advocate vide letter dated 22.08.2008, which also
yielded no response.
9. It was thus, asserted that since the tenancy had expired by efflux of
time and had further been terminated by the Legal Notice dated 06.05.2008,
the Appellant/Defendant had become an unauthorised occupant in the suit
property and was liable to pay damages at the prevailing market rate of
Rs.70/- per sq. ft. per month from June 2008 till vacation of the Suit
Property.
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KUMAR BHATT
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10. The Plaintiff/Respondent accordingly sought possession of the Suit
Property, along with damages @ Rs.70/- per sq. ft. amounting to
Rs.7,42,000/-, being use and occupation charges from June 2006 till filing of
the Suit, and future use and occupation charges @ Rs.80/- per sq. ft. per
month, till handing over of possession, along with interest @ 10% per
annum on the amounts due.
11. The Appellant/Defendant in its Written Statement raised several
preliminary objections contending that the Suit was not maintainable; and
that the Plaintiff/Respondent had not come to Court with clean hands.
12. It was further contended that the Appellant/Defendant having been
declared a Sick Industrial Unit by the Board for Industrial and Financial
Reconstruction (BIFR) vide Order dated 08.08.1996, no Suit or proceeding
against its properties, could be instituted or continued without prior
permission of BIFR under Section 22(1) of the Sick Industrial Companies
(Special Provision) Act, 1985, which permission had not been obtained by
the Plaintiff/Respondent.
13. On merits , the Appellant/Defendant admitted that the suit property
had initially been let out to it by the promoters of Building No.87, Nehru
Place, M/s Pal & Associates, vide Lease Deed dated 22.09.1979 w.e.f.
15.10.1979 at a monthly rent of Rs.3.05/- per sq. ft.Clause III(3) of the said
Lease Deed provided that during the tenure of the lease, the demised
premises may be transferred by the lessor to any person or nominee, subject
to approval by the promoters, and in the event of such transfer, the terms and
conditions contained therein, shall be binding on the lessee and the
transferee, and the lessee shall thereafter pay rent to the nominee.
Signature Not Verified
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KUMAR BHATT
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14. Accordingly, upon purchase of the flat by the Plaintiff/Respondent, a
Rent Agreement in continuation of the original Lease Deed w.e.f.
15.10.1979, was executed between the parties on 01.03.1980 at an initial
rent of Rs.1,616.50/- per month.It was admitted that the rent had been
increased to Rs.3,811.58/- per month w.e.f. 15.10.2006, in terms of Clause
III(1) of the Rent Agreement dated 01.03.1980.
15. The core defence of the Appellant/Defendant was that the lease was in
perpetuity . Placing reliance upon Clause III(1) of the Rent Agreement dated
01.03.1980, the Appellant/Defendant contended that the parties had
expressly agreed that on every successive renewal of the lease for a period
of three years, the rent would be increased by 10% of the last rent paid, and
that the Appellant/Defendant had been duly honouring this obligation.
16. It was asserted that the Plaintiff/Respondent had no right to terminate
the tenancy under the Rent Agreement and that since rent was being
regularly paid and accepted, the tenancy had been validly renewed w.e.f.
15.10.2006.
17. The Appellant/Defendant specifically denied that the initial tenancy
had expired on 14.10.1982 or that it had ever stopped payment of rent. It
was denied that the lease had come to an end by efflux of time or that it had
ever been extended under coercion or pressure. Receipt of the Legal Notice
dated 06.05.2008, and the reminder letter dated 22.08.2008, were also
specifically denied.
18. The Appellant/Defendant denied all liability towards payment of
damages or mesne profits, asserting that it was a lawful contractual tenant in
possession and was not an unauthorised occupant. It was denied that the
prevailing market rent was Rs.70/- per sq. ft. and it was stated that there was
Signature Not Verified
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KUMAR BHATT
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no provision in the Rent Agreement dated 01.03.1980, permitting the
Plaintiff/Respondent to demand possession from the Appellant/Defendant at
his wish.
19. The Plaintiff/Respondent filed a Replication to the Written Statement
of the Appellant/Defendant, denying the contents of the preliminary
objections.
20. It was admitted by the Plaintiff that the Appellant/Defendant had
entered into a Rent Agreement dated 13.10.1979 with M/s Pal & Associates
Pvt. Ltd. for a fixed period of three years, but it was specifically stated that
the same was never renewed or extended by the parties, to the present Suit.
It was asserted that the tenancy was only for a period of three years and had
come to an end by efflux of time, whereafter the Appellant/Defendant
became a month-to-month tenant, whose tenancy was validly terminated by
the Legal Notice dated 06.05.2008, under Section 106 of the TPA, 1882.
21. It was specifically stated that no fresh lease deed or rent agreement
had ever been executed between the parties after the original Rent
Agreement dated 13.10.1979, which was continued by the Agreement dated
01.03.1980.
22. It was further stated that the Appellant/Defendant was in possession
of the original Rent Agreement dated 01.03.1980, and despite receipt of
notice under Order XI Rule 16 CPC, had failed to produce the same before
the Court, and accordingly the said Rent Agreement could not be relied upon
by the Appellant/Defendant.
23. As regards the BIFR objection, it was stated that while the
Appellant/Defendant may have been declared a sick Company by BIFR vide
Order dated 08.08.1996, Section 22(1) of SICA had no applicability in the
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KUMAR BHATT
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facts and circumstances of the present case, as the said provision was
applicable only in proceedings like winding up, recovery of money or
recovery and enforcement of any security against a sick Company, which
was not the nature of the present proceedings. It was further stated that the
Supreme Court has settled the law and held that property of the Company
does not include its leasehold interest or tenancy rights, and accordingly no
permission from BIFR was required for the present proceedings.
24. It was also stated that the Appellant/Defendant had failed to show
when, by whom, and by which instrument the tenancy had been renewed. It
was asserted that the first Rent Agreement was itself a vague Agreement and
that a rent Agreement cannot get extended automatically. It was further
stated that renewal of a lease requires execution of a fresh lease deed in
terms of Section 107 of the TPA 1882, and that a tenancy cannot be
extended by the mere unilateral act of increasing rent by 10%, after every
three years.
25. On merits , the Plaintiff/Respondent reaffirmed the contents of the
Plaint. It was specifically stated that the Plaintiff/Respondent had stopped
accepting rent from the Appellant/Defendant several years ago and that the
deposit of monthly rent in a bank, was a unilateral act of the
Appellant/Defendant over which the Plaintiff/Respondent had no control.
26. On the basis of the pleadings of the parties, the following Issues were
framed on 03.07.2012:
“ 1. Whether the suit is without cause of action? OPD
2. Whether the tenancy is determined/terminated on
30.06.2008 or on other followed day, by Plaintiff's notice
dated 06.05.2008? OPP
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KUMAR BHATT
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3. Whether the plaintiff is entitled for decree of Possession
against the defendant as Prayed in clause A of prayer
clause? OPP
4. Whether the plaintiff is entitled for mesne Profit/damages
of Rs.7,42,000/- w.e.f. June 2006 against the defendant as
prayed in clause B of Prayer clause? OPP
5. Whether the plaintiff is entitled for interest of
Rs.1,24,000/- against the defendant? OPP
6. Whether the plaintiff is entitled for pendente-lite and
future interest @ 10% p.a.? OPP
7. Relief ”
27. In support of his case, the Plaintiff/Respondent examined himself as
PW-1 and tendered his evidence by way of affidavit Ex. PW-1/A. He relied
upon the site plan of the suit propertyEx. PW1/1, copies of the Legal Notice
dated 06.05.2008 Mark A, and reminder dated 22.08.2008 Mark C, along
with postal receipts and acknowledgements. During his cross-examination,
the Rent Agreement dated 01.03.1980 was exhibited as Ex. PW-1/DX.
28. The Plaintiff/Respondent further examined PW-2, Ms. Kusum Lata,
Assistant Zonal Inspector, Central Zone, SDMC, who proved the
Assessment Orders pertaining to the suit property, as Ex. PW2/1 and
Ex.PW2/2.
29. DW-1, Mr. Narain Singh Azad, Junior Engineer (Administration), was
examined on behalf of the Appellant/Defendant, who tendered his affidavit
Ex. DW-1/A. He relied upon the Rent Agreement dated 01.03.1980, Ex.
PW-1/DX.
Signature Not Verified
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KUMAR BHATT
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30. The learned ADJ, on appreciation of the pleadings and evidence, held
that it was admitted that the rent of the Suit Property had been increased to
Rs.3,811.58, which brought the tenancy outside the purview of the DRCAct,
1958.It further held that under Section 107 of the TPA, a lease for a term
exceeding one year, can only be created by a registered instrument, and
accordingly the Rent Agreement Ex.PW1/DX, could not be said to have
been automatically extended for a further period of three years, in the
absence of a registered instrument. The tenancy was at best, to be treated as
a month-to-month tenancy, terminable by Notice under Section 106 of the
Transfer of Property Act, 1882.
31. As regards termination of tenancy, the learned ADJ held that although
the Plaintiff/Respondent had failed to prove service of the Legal Notice
dated 06.05.2008, the service of summons of the Suit upon the
Appellant/Defendant on 11.03.2010 could be treated as Notice under Section
106 of the TPA.
32. On the issue of possession, the learned ADJ noted that the Suit
Property had been vacated by the Appellant/Defendant on 29.04.2022, and
held the issue to have become infructuous.
33. Insofaras mesne profits were concerned, the learned ADJ placed
reliance upon the judgment of this Court in Cement Corporation of India v.
Mrs. Shobha Dikshit , RFA No.440/2014 decided on 04.12.2014, which
pertained to premises on the 5th Floor of the same building i.e. CCI House,
87, Nehru Place, New Delhi.Accordingly, vide the impugned Judgment and
Decree dated 31.01.2024, the Suit of the Plaintiff/Respondent was decreed
for mesne profits at Rs.80/- per sq. ft. on the total area of 530 sq. ft., from
Signature Not Verified
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KUMAR BHATT
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01.04.2010 till 29.04.2022, along with simple interest at 9% per annum on
the due amount from 01.04.2010 till 29.04.2022, and costs .
34. Aggrieved by the Judgment and Decree dated 31.01.2024, the
Appellant/defendant has preferred the present Appeal.
35. The grounds of challenge are that the learned Trial Court erred in
holding that in the absence of registration of the Rent Agreement, the
tenancy after rent crossed Rs.3,500/- per month w.e.f. 15.10.2006 can, at
best, be termed as a monthly tenancy. It is contended that the tenancy of the
Appellant/Defendant had been renewed w.e.f. 15.10.2006, and that there had
been no valid termination of the tenancy as required by the provisions of the
TPA, 1882.
36. It is further contended that the Plaintiff/Respondent had wilfully
refused to renew the Rent Agreement, despite repeated requests and
reminders by the Appellant/Defendant, knowing that the
Appellant/Defendant was a sick industrial unit declared by BIFR vide Order
dated 08.08.1996, and had waited for an opportune time to issue the eviction
Notice dated 06.05.2008.
37. The learned Trial Court also erred in treating the service of summons
of the Suit upon the Appellant/Defendant, as a valid notice under Section
106 of the TPA, 1882. It is submitted that the Legal Notice dated
06.05.2008, and the reminder Notice dated 22.08.2008, were admittedly not
served upon the Appellant/Defendant.
38. Furthermore, since the Rent Agreement had been renewed w.e.f.
15.10.2006 for a period of three years, the Plaintiff/Respondent could not
have issued an eviction Notice dated 06.05.2008 during the subsistence of
the said renewed lease. The Plaintiff/Respondent himself admitted during
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KUMAR BHATT
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cross-examination that he had no information whether the Notice dated
06.05.2008 had been received by the Appellant/Defendant. It is thus,
contended that since the Notices were invalid, the Suit for possession, mesne
profits and damages was founded upon unserved Notices, and was not
maintainable .
39. It is stated that the Appellant/Defendant was a bonafide tenant and not
an unauthorised occupant, and had been meeting its obligations under the
Rent Agreement dated 01.03.1980, and was accordingly, not liable to pay
any damages. Further, the Plaintiff/Respondent had been consistently
accepting rent, as per the agreed terms.
40. The learned Trial Court erred in assessing mesne profits at Rs.80/- per
sq. ft., despite the Plaintiff/Respondent having failed to produce any
independent evidence of the prevailing market rent. He had erroneously
relied upon a judgment „Cement Corporation „of India Vs. Mrs. Shobha
Dikshit , RFA No. 440/2014 decided on 04.12.2014, pertaining to a different
floor of the same building, without considering the condition and state of
repair of the suit property. The Plaintiff/Respondent admitted during cross-
examination that he had not let out any other property at the rate claimed
and had heard the market rate from a broker named Mr. Sharma.
41. It is further contended that the properties relied upon by the learned
Trial Court for assessing mesne profits, though situated in the same building,
were not in the same condition as the suit property, and that the condition
and state of repair of the Suit Property was not taken into consideration by
the learned Trial Court, while assessing mesne profits.
42. Learned counsel on behalf of the Appellant/Defendant submitted
that the learned Trial Court had failed to frame any issue with respect to the
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KUMAR BHATT
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preliminary objection under Section 22(1) of SICA and had not considered
the effect thereof, on the maintainability of the proceedings and the award of
interest.
43. Reliance was placed upon the judgment of the Hon'ble Supreme Court
in Fertilizer Corporation of India vs. Coromandal Fertilizers Ltd . 2024
INSC 348 to contend that where an inquiry under Section 16 of SICA is
pending or a scheme under Section 17 is under implementation, legal
proceedings of the nature specified under Section 22(1), cannot be initiated
or proceeded with except with the consent of BIFR, and that the award of
interest in such circumstances, was unsustainable.
44. Per contra , learned counsel on behalf of the Plaintiff/Respondent
supported the impugned Judgment and Decree, and submitted thatthe
learned Trial Court had correctly assessed mesne profits at Rs.80/- per sq.
ft., by placing reliance upon a directly comparable judgment of this Court,
pertaining to the same building and the same Appellant/Defendant.
45. It was further submitted that the award of interest at 9% per annum
was reasonable and just.
Submissions heard and record perused.
46. The present Appeal essentially raises the following questions for
consideration:
(i) Whether the protection under Section 22(1) of the Sick Industrial
Companies (Special Provision) Act, 1985 barred the present
proceedings;
(ii) Whether the tenancy of the Appellant/Defendant stood validly
terminated so as to render it liable to pay mesne profits;
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KUMAR BHATT
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(iii) Whether the quantum of mesne profits assessed at Rs.80/- per sq.
ft. is just and sustainable in law.
(iv) Whether payment of interest @ 9% per annum on the due amount
from 01.04.2010 till 29.04.2022 is justified?
I. Whether Section 22(1) of SICA barred the present proceedings:
47. The Appellant/Defendant had been declared a Sick industrial
Company by the Board for Industrial and Financial Reconstruction (BIFR),
vide Order dated 08.08.1996, and the Rehabilitation Scheme dated
03.05.2006,was sanctioned in its favour.
48. It has been argued that in view of Section 22(1) of the Sick Industrial
Companies (Special Provisions) Act, 1985 (hereinafter referred to as
"SICA") , the present proceedings could neither have been instituted nor
continued, without the permission of BIFR. It has further been contended
that the learned ADJ failed to frame and determine a specific issue on this
objection, despite the same having been expressly taken in the Written
Statement.
49. There can be no dispute that the defence founded upon Section 22(1)
of SICA, was specifically raised by the Appellant/Defendant. Equally, the
learned ADJ has not returned any independent finding thereon. However,
the question which arises is: whether Section 22(1) of SICA barred the
present Suit for Possession/damages . It is a legal question, amenable to be
considered in the Appeal, as well. Therefore, the objection of maintainability
of the Suit for Recovery of Possession and Mesne Profits may now be
considered.
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KUMAR BHATT
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50. Section 22(1) SICA was enacted to afford protection to a sick
industrial Company during the period of inquiry, preparation or
implementation of a rehabilitation scheme and to prevent coercive
proceedings against its assets,to avoid frustrating the process of revival. The
provision, however, does not create a blanket prohibition against every
proceeding, in which a sick Company is impleaded as a party.
51. Section 22(1) SICA further provides that subject to the fulfilment of
the conditions as described in the sub-section, proceedings of the nature
mentioned therein shall remain suspended in respect of a sick industrial
company. For the bar under the sub-section to get attracted, it is necessary
that in respect of an industrial Company:
(i) An inquiry under Section 16 SICA is pending; or
(ii) A scheme under Section 17 SICA is under preparation or
consideration; or
(iii) A sanctioned scheme is under implementation: or
(iv) An Appeal under Section 25 SICA is pending.
52. Even if one of the four conditions, as mentioned hereinabove, is
fulfilled, then notwithstanding anything contained in the Companies Act,
1956 or any other law, the proceedings cannot be initiated, and if already
initiated, cannot be proceeded with, except with the consent of BIFR or
AAIFR, as the case may be. The nature of the proceedings may be as the
following:
(i) Winding up of the industrial company;
(ii) Execution, distress or the like against any of the properties of the
industrial company;
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KUMAR BHATT
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(iii) Appointment of Receiver in respect of any of the properties of
the industrial company;
(iv) Suit for Recovery of money fro m the industrial company;
(v) Suit for enforcement of a security against the industrial
company;or
(vi) Suit for enforcement of a guarantee in respect of loans or
advance granted to the industrial company.
53. One of the earliest decisions concerning Section 22(1) was, in the case
of Gram Panchayat, Salwad vs. Shree Vallabh Glass Works Ltd. , (1990) 2
SCC 440 wherein the Bombay High Court had quashed the recovery
proceedings towards property taxes and other amounts due, under the
provisions of the Bombay Village Panchayat Act, 1959 against the
respondent company as it was declared a sick Company, under the Act. It
was held that:
“ 10. In the light of the steps taken by the Board under
Sections 16 and 17 of the Act, no proceedings for
execution, distress or the like proceedings against any of
the properties of the company, shall lie or be proceeded
further except with the consent of the Board. Indeed,
there would be automatic suspension of such proceedings
against the company‟s properties.
*
11. It may be against the principles of equity. The
creditors are not allowed to recover their dues from the
company, but such creditors may approach the Board for
permission to proceed against the company for the
recovery of their dues/outstandings/overdues or arrears
by whatever name it is called. The Board at its
discretion, may accord its approval for proceeding
against the company. If the approval is not granted, the
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KUMAR BHATT
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remedy is not extinguished.It is only postponed . Sub-
section (5) of Section 22 provides for exclusion of the
period during which the remedy is suspended while
computing the period of limitation for recovery of dues.”
54. The quashing of recovery proceedings against the properties of the
Company by the High Court, was held to be justified.
55. Likewise, the Supreme Court of India in the case of Maharashtra
Tubes Ltd. vs. Maharashtra SIIC, (1993) 2 SCC 144 while considering the
interplay between the power of recovery under the State Financial
Corporations Act, 1951 and the suspension of certain legal proceedings
under Section 22 of the SICA 1985 Act, held that:
“The purpose and object of this provision is clearly to
await the outcome of the reference made to BIFR for the
revival and rehabilitation of the sickindustrial company.
The words “or the like” which follow the words
“execution” and “distress” are clearly intended to
convey that the properties of the sick industrial
company shall not be made the subject-matter of
coercive action of similar quality and characteristic till
BIFR finally disposes of the reference made under
Section 15 of the said enactment. The legislature has
advisedly used an omnibus expression “the like” as it
could not have conceived of all possible coercive
measures that may be taken against a sick undertaking.
The action contemplated by Section 29 of the 1951 Act
is undoubtedly a coercive measure directed at the
takeover of the management and property of the
industrial concern and confers a further right on the
Financial Corporation to transfer by way of lease or sale
the properties of the said concern and any such transfer
effected by the Financial Corporation would vest in the
transferee all rights in or to the transferred property as if
the transferwas made by the owner of the property. So
also under the said provision the Financial Corporation
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KUMAR BHATT
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will have the same rights and powers with respect to
goods manufactured or produced wholly or partly from
goods forming part of the security held by it as it had
with respect to the original goods. It is, therefore,
obvious on a plain reading of Section 29 of the 1951 act
that it permits coercive action against the defaulting
industrial concern of the type which would be taken in
execution or distress proceedings; the only difference
being that in the latter case the party concerned would
have to use the forum prescribed by law for the purpose
of securing attachment and sale of property of the
defaulting industrial concern whereas in the case of a
Financial Corporation that right is conferred on the
creditor corporation itself which is permitted to take over
the management and possession of the properties and
deal with them as if it were the owner of the properties. If
the Corporation is permitted to resort to the provision of
Section 29 of the 1951 Act while proceedings under
Sections 15 to 19 of the 1985 Act are pending it will
render the entireprocess nugatory. In such a situation the
law merely expects the corporation and for that matter
any other creditor to obtain the consent of BIFR or, as
the case may be, the appellate authority to proceed
against the industrial concern. The law has not left them
without a remedy. We are, therefore, of the opinion that
the word “proceedings” in Section 22(1) cannot be
given a narrow or restricted meaning to limit the same
to legal proceedings. Such a narrow meaning would
run counter to the scheme of the law and frustrate the
very object and purpose of Section 22(1) of the 1985
Act. ” (emphasis supplied)
56. The next question for consideration is whether the proceedings for the
recovery of dues arising after the sanctioning of scheme, as in the present
case, would also be covered under the protective umbrella of Section 22(1)
of the 1985 Act. This aspect was considered by the Hon’ble Supreme Court
Signature Not Verified
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of India in the Case of CTO vs. Corromandal Pharmaceutical s , (1997) 10
SCC 649wherein after making a reference to Gram Panchayat Salwad
(supra) and Maharashtra Tubes (supra), it was held that:
“It is in implementation of the scheme formulated by
BIFR wherein 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.”
57. It was further observed that:
“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, an 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 totalityof 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 oflegal proceedings from
the moment an inquiry is started, till after the
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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 onlyto such of those dues
reckoned or included in the sanctioned scheme. Such
mounts 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 ill 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, unreasonable and against the spirit of the
statute in a business sense, should be avoided.”
58. The decision in Corromandal Pharmaceuticals (supra) was referred
to, by the Supreme Court of India in the case of Jay Engg. Works Ltd. vs.
IndustryFacilitation Council , (2006) 8 SCC 677 wherein it was held that, if
the liabilities of the creditor were duly considered and made a part of the
rehabilitation scheme, the bar of Section 22(1) of the 1985 Act would apply,
notwithstanding that the liabilities arose after the Company was declared to
be a sickcompany. It was held that:
“18. Whereas an adjudicatory process of making an
award under 1993 Act, may not come within the purview
of 1985 Act but once an award made is sought to be
executed, it shall come into play. Once the awarded
amount has been included in the scheme approved by the
Board, in our opinion, Section 22 of the 1985 Act would
apply. ”
59. A three-Judge Bench of the Supreme Court in Raheja Universal Ltd.
vs. NRC Ltd. , (2012) 4 SCC 148, undertook a comprehensive study of the
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various Judgments of the Supreme Court of India, on the interpretation of
Section 22 of the Act, 1985. It was observed that:
“23. Largely the proceedings before BIFR, are specific to
rehabilitation or winding up of the sick company and
SICA 1985 hardly contemplates adversarialproceedings.
The bodies constituted under SICA 1985 would least
exercise their jurisdiction to a lis between any party upon
the rival interests of the parties.”
*
55. Despite these judgments and with an intention to
clarify the law, we would state that the natters which are
connected with the sanctioning and implementation of
the scheme right from the date on which it is presented or
the date from which the scheme is made effective.
whichever is earlier, would be the matters which
squarely fall within the ambit and scope of Section 22 of
SICA 1985 subject to their satisfying the ingredients
stated under that provision. This would include the
proceedings before the civil court, Revenue Authorities
and/or any other competent forum in the form of
execution or distress in relation to recovery of amount by
sale or otherwise of the assets of the sick industrial
company. It is difficult for us to hold that merely because
a demand by a creditor had not been made a part of the
scheme, pre- or post-sanctioning of the same for that
reason alone, it would fall outside the ambit ofprotection
ofSection 22 of SICA 1985.
*
58. Section 22 is the reservoir of the statutory powers
empowering BIFR to determine a scheme, right from its
presentation till itscomplete implementation in
accordance with law, free of interjections and
interference from other judicial processes. Section 22(1)
deals with the execution, distress or the like proceedings
against the company's properties, including appointment
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of a Receiver. It also specifically provides that even a
winding-up petition would not be instituted and no other
proceedings shall lie or proceed further, except with the
consent of BIFR.”
60. It was further observed that the provisions of Section 22 of SICA
1985, were self-explanatory. They would cease to operate within their own
limitations and not by force of any other law, agreement, memorandum or
even articles of association of the company. It was observed as follows:
“61. The purpose is so very clear that during the
examination, finalization and implementation of the
scheme,there should be no impediment caused to the
smooth execution of the scheme of revival of the sick
industrial company. It is only when the specified period
of restrictions and declarations contemplated under the
provisions of SICA 1985 is over that the status quo ante
as it existed at the time of consideration and finalization
of the scheme, would become operative.”
*
“79. The expression “no proceedings” that finds place in
Section 22(1) is of wide spectrum but it certainly is not
free of exceptions. The framers of law had given a
definite meaning to the expression “proceedings”, which
are for the winding up of the industrial company or for
execution, distress or the like against any of the
properties of the industrial company or the appointment
of a Receiver in respect thereof . The expression “the
like” has to be read ejusdem generis to the term
“proceedings”. These words have a definite connotation
and can have an effect of nullifying or obstructing the
sanctioning or implementation of the revival scheme, as
contemplated under the provisions of the SICA,
1985 . This is what is required to be avoided for effective
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implementation of the scheme. The other facet of the same
section is that, no Suit for recovery of money, or for
enforcement of any security against the industrial
company, or any guarantee in respect of any loan or
advance granted to the industrial company, shall lie, or
be proceeded with further without the consent of BIFR. In
other words, asuit for recovery and/or for the stated kind
of reliefs, cannot lie or be proceeded with further, without
the leave of BIFR .
80. It is difficult to state with precision the principle that
would uniformly apply to all the proceedings/suits falling
under Section 22(1) of SICA 1985. Firstly, it will depend
upon the facts and circumstances of a given case, it
must satisfy the ingredients of Section 22(1) and fall
under any of the various classes of proceedings stated
thereunder. Secondly, theseproceedings should have the
impact of interfering with the formulation,
consideration, finalisation or implementation of the
scheme.”
61. All the aforesaid decisions proceed on the principle that whether
embargo of S.22(1) is attracted, would depend, firstly on the facts of each
case. Secondly, only those proceedings which interfere, or are likely to
interfere, with the formulation, consideration, finalisation or implementation
of a rehabilitation scheme under Chapter III of SICA, attract the embargo
contained in Section 22(1) of the Act.
62. In addition to the two conditions explained in the case of Jay Engg.
Works Ltd. (supra), a third condition was spelt out by Delhi High Court in
Goyal MG Gases (P) Ltd. (supra) wherein it was held that even if the Suit
proceedings is of the category contemplated under Section 22(1) that by
itself, will not attract the bar contained in the said provision unless it
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additionally has the impact of interfering with the formulation,
consideration, finalization or implementation of the scheme.
63. The aforesaid cases were considered by the Supreme Court in the
Case of Fertilizer Corporation of India Limited and Others vs. Coromandal
Sacks Private Limited , (2024) 8 SCC 172,wherein it was observed that
without a cavil of doubt, proceedings in the nature of execution, distress,
appointment of a Receiver, attachment of immovable property or bank
accounts would directly affect the assets of the sick company and
consequently impede the formulation or implementation of the rehabilitation
scheme. It was, however, clarified that extending the protection of Section
22(1) even to proceedings which have no impact on the successful
formulation or implementation of the rehabilitation scheme or on the revival
of the sick company, would be contrary to the object of SICA, which was
never intended to confer absolute immunity upon a sick industrial company.
64. The Division Bench of this Court in the case of Saketh India Ltd. vs.
W. Diamond India Ltd ., 2010 SCC OnLineDel 1786, also examined the
scope of Section 22(1) of SICA, in the light of the object sought to be
achieved by the enactment. It was held that the expression " suit for
recovery" occurring therein must be construed ejusdem generis with the
preceding expressions " execution, distress or the like ". Consequently, only
such suits for recovery as partake the character of coercive enforcement
proceedings, would attract the bar contained in Section 22(1).
65. It was further held that there was no justification for treating all legal
proceedings as non-maintainable or liable to be stayed merely because the
debt sought to be established in the plaint had not yet beenadmitted by the
sick company. It was observed as under:
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“ Considering 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 unjustifiedhardship. 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 amount, or a
substantial part of it stands admitted, either in the suit or
by means of a mention in the Scheme placed before
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 manifestlv 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.”
66. The Apex Court in Corromandal Pharmaceuticals (supra) clarified
that cessation of legal proceedings under Section 22(1) SICA is justified
only where the dues in respect of which adjudication is ongoing, is also
included in, or within the contemplation of the scheme presented to BIFR.
The similar observations were made in Sirmor SudburgAuto Ltd. vs. Kuldip
Singh Lamba, 1997 SCC OnLine Del 514.
67. In the case of Sunil Mittal Properties vs. LML Ltd ., 2011 SCC OnLine
Del 236, it was clarified that since the liability was neither admitted or taken
into consideration by any rehabilitation scheme, the suit proceedings could
not have been adjourned sine die under Section 22 (1) of the 1985 Act.
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68. Similarly, in the case of Haryana Steel& Alloys Ltd. vs. Transport
Corpn. of India, 2012 SCC OnLineDel 2140, it was held that mere
contention of a 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
cover of Section 22(1) of the Act.
69. Likewise, in the case of Kusum Products Ltd. vs. Hitkari Industries
Ltd. , 2014 SCC OnLineDel 4926, it was held that not every suit for recovery
would automatically constitute proceedings in the nature of execution,
distress or the like, and that only such suits of recovery as may result in
liquidation of assets of a sick company would attract the bar of Section
22(1) of SICA. In the facts of that case, it was further observed that the suit
was one for recovery of money simpliciter, no interim relief under Order
XXXVIII Rule 5 or Order XXXIX Rules 1 and 2 CPC had been pressed, and
consequently, there was no threat of liquidation of the assets of the sick
company, so as to require prior permission under Section 22 of SICA.
70. Similarly, in the case of FMI Investment (P) Ltd. vs. Montari
Industries Ltd ., 2012 SCC OnLine Del 5354, it was held that a suit for
recovery of money simpliciter, where the properties of the sick company are
not threatened by execution, distress, appointment of a Receiver or similar
coercive proceedings, can continue without obtaining permission under
Section 22 of SICA.
71. The Hon’ble Supreme Court of India in Raheja Universal Ltd. vs.
NRC Ltd., (2012) 4 SCC 148, held that unless the proceedings are in the
nature of “execution, distress or the like”,the suit can continue . It was
further held that the suit for recovery under Order XXXVII CPC was merely
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a suit for recovery of money simpliciter and did not involve any
proceedings, whether interim or final, in the nature of execution, distress or
the like, nor did it pose any threat to the properties of the sick company so as
to affect the rehabilitation scheme. Accordingly, it was held that the suit was
not barred by Section 22 of SICA.
72. Furthermore, in the case of Chhattisgarh Distilleries Ltd. vs. Percept
Advertising Ltd ., 2023 SCC OnLine Del 6417, it was reiterated that the
expression “recovery of money”occurring in section 22(1) of SICA must be
construed ejusdem generis, and accordingly, only recovery proceedings in
the nature of execution or any other coercive enforcement, has been
ordainedto be not maintainable. There is nothing in this Section to hold that
any legal proceedings would be notmaintainable, or liable to be halted,
merely because the debt sought to be proved in the plaint has not been
admitted.
73. Therefore, in the case of Fertilizer Corp. of India Ltd. (supra), it was
concluded that for the applicability of Section 22(1) of SICA, three
conditions are required to be satisfied. Firstly , an inquiry under Section 16
must be pending, or a scheme referred to in Section 17 must be under
preparation or consideration, or a sanctioned scheme must be under
implementation, or an Appeal under Section 25 must be pending in relation
to the sick industrial company. Secondly , the proceedings sought to be
stayed must be one of the categories expressly contemplated under Section
22(1) of SICA, namely, proceedings for winding up of the industrial
company, execution, distress or the like against any of the properties of the
industrial company, appointment of a Receiver in respect of its properties, a
Suit for recovery of money, enforcement of any security against the
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industrial company, or enforcement of any guarantee in respect of any loan
or advance granted to the industrial company, or must otherwise be of a
similar nature, i.e., ejusdem generis to the aforesaid proceedings. 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 rehabilitation scheme.
74. Applying the aforesaid three tests to the present case, the present Suit
is simpliciter a Suit for possession and mesne profits. The proceedings
neither fall within the category of coercive proceedings contemplated under
Section 22(1) of SICA nor do they have the effect of threatening the assets
of the Appellant/Defendant or interfering with the formulation,
consideration, finalisation or implementation of the rehabilitation scheme.
75. This precise question was considered by the Delhi High Court in
Sirmor Sudburg Auto Ltd. vs. Kuldip Singh Lamba , 1997 SCC OnLine Del
514, wherein it was held that eviction proceedings instituted against a sick
industrial company are not liable to be stayed under Section 22(1) of SICA.
76. The said decision was noticed with approval by the Hon'ble Supreme
Court in Fertilizer Corporation of India Ltd. (supra). Accordingly, the
embargo under Section 22(1) of SICA is not attracted to the present Suit,
merely because the Appellant/Defendant had been declared a sick industrial
company or a rehabilitation scheme had been sanctioned in its favour in the
year 2006.
II. Whether there was valid termination of Tenancy:
77. It is an admitted case that the suit property was taken on rent vide
Rent Agreement dated 1.03.1980 Ex.PW1/DX initially for three years. It
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was not renewed thereafter, but rent was increased from time to time and
was eventually enhanced to Rs.3,811.58/- per month w.e.f. 15.10.2006,
thereby taking the tenancy outside the purview of the DRC Act and bringing
it under the TPA, 1882. Under Section 107 of the TPA, a lease from year to
year or for a term exceeding one year, can be created or renewed only by a
registered instrument.
78. The principal contention of the Appellant/Defendant is that the
tenancy was perpetual in nature and stood validly renewed w.e.f. 15.10.2006
in terms of Clause III(1) of the Rent Agreement dated
01.03.1980Ex.PW1/DX, which stipulated enhancement of rent by 10% upon
every successive renewal of three years. PW-1, Sh. Narender Gopal Kapahi
admitted in his cross-examination, that the Appellant/Defendant used to
send letters seeking renewal after every three years and that rent was
correspondingly enhanced.
79. However, even if it is accepted that the parties continued their
relationship with successive renewals and enhancement of rent, the same
does not advance the case of the Appellant/Defendant. The Rent Agreement
for more than eleven months, requires compulsory registration, in terms of
S.17 of the Registration Act.
80. Admittedly, no registered instrument of renewal was ever executed
after 15.10.2006. The parties could not, by agreement or conduct, dispense
with the statutory requirement contained inS.17 of the Registration Act.
Consequently, the Rent Agreement dated 01.03.1980 Ex.PW1/DX could not
be treated as having been renewed for a further fixed term of three years.
Therefore, even if the relationship of Landlord-tenant continued, it could
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only be a month to month tenancy, terminable under Section 106 of the
TPA, as has been rightly held that by learned ADJ .
81. As regards the termination of tenancy, the Plaintiff/Respondent
admittedly failed to prove service of the Legal Notice dated 06.05.2008,
upon the Appellant/Defendant.
82. However, it was settled by the Supreme Court in Nopany Investments
(P) Ltd. v. Santokh Singh (HUF) , (2008) 2 SCC 728, that the filing of a Suit
for possession under the general law, itself operates as a Notice to quit upon
the tenant and constitutes sufficient termination of tenancy, under Section
106 of the TPA. The summons of the present Suit were served upon the
Appellant/Defendant on 11.03.2010, which itself constituted a valid Notice
of termination.
83. Furthermore, once the tenancy stood terminated, the
Appellant/Defendant ceased to have any legal right to continue in
occupation of the Suit Property. The contention that it remained a bona fide
contractual tenant throughout and was therefore, not liable for mesne profits,
cannot be accepted. Once the tenancy stood terminated and the
Appellant/Defendant continued in occupation without any legal right, it
became an unauthorised occupant regardless of its prior status as a
contractual tenant.
84. The Appellant/Defendant having continued in occupation of the suit
property from 01.04.2010 till 29.04.2022 (when the possession was
returned), without any legal right, was rightly held liable to pay mesne
profits for the said period.
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III. Whether the quantum of mesne profits assessed at Rs.80/- per sq. ft.
is sustainable:
85. The Appellant/Defendant has assailed the award of mesne profits on
the ground that the Plaintiff/Respondent did not lead any independent
evidence regarding the prevailing market rent of the Suit Property and that
the learned Trial Court had no basis to assess mesne profits at Rs.80/- per sq.
ft.
86. It is well settled that mesne profits are payable at the rate at which the
landlord could reasonably have let out the premises in the market and are not
confined to the contractual rent. In Atma Ram Properties Pvt. Ltd. v. Federal
Motors Pvt. Ltd. , (2005) 1 SCC 705, the Supreme Court observed that upon
termination of the tenancy, compensation for use and occupation is payable
at the rate at which the landlord could reasonably have let out the premises
in the open market.
87. It is true that no independent lease deed or independent evidence
regarding the prevailing rental value of the suit property,was produced by
the Plaintiff/Respondent. However, the learned Trial Court did not
determine mesne profits, in a factual vacuum. The Plaintiff/Respondent
placed on record the Judgment of this Court in Cement Corporation of India
Ltd. v. Mrs. Shobha Dikshit , RFA No.440/2014 decided on 04.12.2014,
pertaining to a comparable commercial unit in the same building, occupied
by the same Appellant/Defendant.
88. The said judgment involved the same Appellant/Defendant, the same
building, and comparable transactions duringsimilar time period. The Suit
Property in the present case is situated on the 4th floor of the same
building. In the aforesaid case, a unit on the 2nd Floor of the same building,
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had been leased out at Rs.106/- per sq. ft. in the year 2006, and another unit
on the 10th Floor at Rs.85/- per sq. ft., in the year 2010. Taking these
comparable transactions into consideration, mesne profits in respect of the
Unit situated on the 5th Floor in this case were assessed at Rs.100/- per sq.
ft., and upheld by this Court.
89. The Plaintiff/Respondent had claimed mesne profits at Rs.70/- per
sq. ft. from June 2006, and Rs.80/- per sq. ft. from June 2008. The grant
of Rs.80/- per sq. ft. for the 4th floor of the same building, is not only
conservative, but is well within the range established by the comparable
evidence on record. No interference with the said finding, is warranted.
90. Significantly, despite specifically challenging the quantum of mesne
profits, the Appellant/Defendant did not lead any evidence whatsoever to
establish that the prevailing market rent during the relevant period, was
lower than the rate awarded. No comparable lease deed, valuation material
or other evidence was produced in rebuttal.
91. The contention that the premises relied upon by the learned Trial
Court were not comparable, on account of differences in condition or state
of repair is equally without merit. No evidence was led by the
Appellant/Defendant, nor did DW-1 depose about any poor condition or
state of disrepair of the suit property in his affidavit, to establish that the Suit
Property suffered from any peculiar disadvantage affecting its rental value.
92. The learned Trial Court was justified in drawing guidance from the
aforementioned judgment of this Court in Mrs. Shobha Dikshit (supra)
wherein, on the basis of comparable lease deeds pertaining to commercial
units in the same building, to grant mesne profits at the rate of Rs.100/- per
sq. ft..
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IV. Whether payment of interest @ 9% per annum on the due
amount from 01.04.2010 till 29.04.2022 is justified:
93. The concept of grant of interest has been explained by the Supreme
Court in the case of Alok Shanker Pandey vs. Union of India & Ors ., 2007
(3) SCC 545, wherein it was held that there exists a misconception about
interest. It is not a penalty or punishment, but normal accretion on capital. It
was explained that the principal amount pocketed by the Defendant over a
period of time and held to be payable to the Plaintiff, entails pocketing of
interest on this amount by the Defendant. Had this amount been paid to the
Plaintiff, when it became due, he would have derived the benefit of
examining interest thereon, of which he is deprived during the period, when
the Suit is pending. Hence, equity demands that the Defendant should not
only repay the principal amount, but also compensate the Plaintiff by
payment of interest, thereon.
94. Interest on the delayed payment of the amount claimed accrues on
account of the continuing wrong occasioned by the wilful withholding of the
amount due to the Plaintiff, thereby causing a continuing injury until such
payment is made or, in other words, until the claim is realised, as explained
in the case of Fertilizer Corporation of India (supra).
95. It was explained in the case of Fertilizer Corporation of India (supra)
that the Sick Industrial Companies (Special Provisions) Act, 1985 ('SICA')
was enacted, inter alia , to provide ameliorative measures for the revival of
sick industrial companies and for the expeditious detection of potentially
sick companies. In particular, Section 24 of SICA envisaged that a
rehabilitation scheme may provide financial assistance to the sick industrial
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Company by way of loans, advances, reliefs, concessions or sacrifices by the
Central Government, a State Government, a public financial institution or
other agencies.
96. Furthermore, Section 22(1) of SICA suspends the legal proceedings
specified therein where they are likely to interfere with the consideration,
sanction or implementation of the rehabilitation scheme. The object
underlying such protection is, without a doubt, to enhance the prospects of
revival of the sick industrial company in public interest.
97. It was further explained in the case of Modi Rubber Ltd. vs.
Continental Carbon (India) Ltd. , (2023) 17 SCC 263, that once a
rehabilitation scheme prepared under Section 18 of SICA by the Operating
Agency is sanctioned by BIFR, and such scheme provides, inter alia , for
scaling down the dues of unsecured creditors, the same becomes binding on
all concerned. Otherwise, the rehabilitation scheme would become
unworkable and the very object and purpose of the enactment of SICA,
1985, would stand frustrated.
98. It was further observed that if certain unsecured creditors, or even the
workmen, are permitted to remain outside the purview of the rehabilitation
scheme and are allowed to enforce their claims independently after the
scheme has been implemented, the rehabilitation scheme itself would
become unworkable. In order to render the sick industrial company
financially viable, all stakeholders, including unsecured creditors, are
required to make a reasonable sacrifice; otherwise, the very effort at revival
would fail.
99. Considering the observations made in the case of Modi Rubber Ltd .
( supra ), and in the case of Fertilizer Corporation of India ( supra ), it was
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concluded in Modi Rubber Ltd.(supra) held that during the period when the
Defendant Company was a sickCompany before BIFR, it cannot be said that
it was withholding the payment of the dues of the original Plaintiff, wilfully
and intentionally . It is so because firstly, the liability of theDefendants was
disputed and was finally adjudicated only by way of the impugned
Judgment,much after 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 BIFR, recovery of the same could not have been done
without the permission of BIFR, in view of suspension of recovery
proceedings under Section 22(1) of the SICA. It was thus, concluded that the
interest from the date when the Company is declared sick till the day it is
ceased to be a sick Company, would exclude any liability of payment of
interest.
100. In the present case as well, while grant of interest of 9% may not be
considered as excessive, but applying the principles as explained in
Fertilizer Corporation of India ( supra ) and Modi Rubber Ltd.(supra) , it is
held that the interest shall not be payable from the date, when the Appellant
Company was declared sick on 08.08.1996 and till it is declared to have
been rehabilitated and discharged from its liabilities of being a sick
Company. The Rehabilitation Scheme was proposed on 03.05.2006.
101. There is nothing on record to show that the Company has been
revived or come out of the ambit of sick Company. The Possession of the
Suit Property has been handed over on 29.04.2022. In the given
circumstances, it is held that the Appellant Company has no liability of
payment of the interest as awarded vide impugned Judgment dated
31.01.2024.
Signature Not Verified
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:13.07.2026
10:48:07
RFA 521 /2024 Page 34 of 35
Conclusion:
102. In view of the aforesaid discussion, Appeal is partly allowed, whereby
the mesne profits granted @ 80/-per sq. ft. is upheld. However, the
Appellant is held not liable to pay any interest on the aforesaid amount.
103. Pending Applications, if any, are also disposed of, accordingly.
(NEENA BANSAL KRISHNA)
JUDGE
JULY07, 2026/RS
Signature Not Verified
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:13.07.2026
10:48:07
RFA 521 /2024 Page 35 of 35