LEGAL HEADLINE SICA protection does not bar suits for possession and mesne profits against sick industrial companies.

The Respondent (Plaintiff) is the owner of a commercial flat in Nehru Place, New Delhi, which was let to the Appellant (a Public Sector Undertaking) in 1979.

Over time, the rent exceeded ₹3,500, removing the tenancy from the protection of the Delhi Rent Control Act.

The Respondent terminated the tenancy via legal notice in 2008 and subsequently filed a suit for possession and mesne profits.

The Appellant contended that the lease was perpetual and further argued that because it was declared a "sick industrial unit" by the BIFR in 1996, the suit was barred under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act (SICA), 1985.

The Trial Court decreed the suit, awarding mesne profits at ₹80 per sq. ft. with 9% interest.

Section 22(1) of SICA, 1985, which suspends legal proceedings like execution or distress against sick companies, but interpreted it ejusdem generis, holding that it only bars proceedings that interfere with the rehabilitation scheme.

Section 107 of the TPA, 1882, and Section 17 of the Registration Act, 1908, stipulating that leases exceeding one year must be registered; otherwise, they are treated as month-to-month tenancies.

The doctrine in Nopany Investments (P) Ltd. v. Santokh Singh to hold that service of suit summons acts as a valid notice to quit.

Principles from Fertilizer Corporation of India v. Coromandal Sacks Pvt. Ltd. (2024) and Modi Rubber Ltd. v. Continental Carbon (India) Ltd. (2023), which establish that interest should not be charged for the period a company is under BIFR protection as the withholding of dues is not considered "wilful".

The Court determined that Section 22(1) of SICA did not bar the suit because an eviction proceeding does not threaten the industrial assets required for rehabilitation, nor was the mesne profit liability included in the sanctioned scheme.

On the merits of the tenancy, the Court rejected the "perpetual lease" argument, noting that in the absence of a registered renewal deed, the tenancy was merely month-to-month and was effectively terminated upon the service of the suit summons in 2010.

Regarding the quantum of mesne profits, the Court found the rate of ₹80 per sq. ft. reasonable by comparing it to a prior judgment (Mrs. Shobha Dikshit) involving the same building and the same Appellant where ₹100 per sq. ft. was upheld.

However, on the issue of interest, the Court found that the Appellant was protected during its period of "sickness".

It set aside the award of interest, holding that the Appellant was not liable to pay interest on the mesne profits due to its status as a sick company under SICA and the principles of equity established by the Supreme Court. The parties were directed to bear their own costs.