ORDER
J.D. Kapoor, J.
1. The sole question to be determined in this application is whether the proceedings under Section 11 of the Arbitration and Conciliation Act 1996 (hereinafter referred as Act of 1996) can be stayed on account of the respondent’s having been declared as a sick company under Section 22 of the Sick Industrial Companies Act (hereinafter referred as SICA) and particularly when the scheme for revival of the company is still pending with the BIFR.
2. The learned counsel for the respondent has placed reliance upon Lloyd Insulations (India) Ltd Vs. Cement Corporation of India of 1997 Company Cases 483 wherein it was observed that Section 22(1) contemplates that any proceedings for the recovery of money against the sick company have to be stayed if an application under Section 21 of the Sick Industrial Company Act is moved. However, the facts of the referred case are distinguishable. In the said case arbitrator had passed the award which was registered as a suit in favor of Lloyd Insulations (India) Ltd and against the Cement Corporation of India. The Cement Corporation of India filed objections against the award. In the intervening period the Cement Corporation of India was declared a sick unit and as such an application under Section 22(1) of the SICA was moved.
3. It was argued that whatever the nature of the proceedings be in the suit filed on the basis of the award in effect and in substance it is an action for recovery of money against the applicant and, therefore, it is a suit within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985 and therefore, the proceedings should be stayed.
4. Section 22 of the SICA contemplates suspension of legal proceedings and contracts etc. and reads as under:
“Where in respect of an industrial company, an inquiry under Section h is pending or any scheme referred to under section 17 is under preparation or consideration of a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company of another instrument having effect under the said Act or other law, no proceedings 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 for the appointment of a receiver in respect thereof an 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 appellant authority”.
5. Another relevant provision is sub-Section (3) of Section 22 of the SICA which is as under:
“Where an inquiry under Section 16 is pending or any scheme referred to in section 17 is under preparation or during the period of consideration of any scheme under section 18 or where any such scheme is sanctioned there under, for due implementation of the scheme, the Board may be order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations, and liabilities accruing or arising there under before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board”.
6. It is pertinent to mention here that in Lloyds Insulation Case it was specifically observed that the question to be determined was whether a suit filed on the basis of the award is the nature of proceedings for recovery of money or not and not the question whether the petition for appointment of arbitrator amounts to a suit for recovery. It was in the light of the finding that the suit filed on the basis of award was a step towards recovery of money, that the execution was stayed under the provisions of Section 22 of the SICA.
7. The question whether the proceedings under Section 11 of the Act of 1996 can continue in the event of a company having been declared sick and the scheme for its revival having been redrawn under the provisions of Section 22 of the SICA cropped up directly for consideration before the Hon’ble Supreme court in Agio Countertrade Pvt. Ltd. vs. Punjab Iron & Steel Co. Ltd and it was held that the proceedings for the appointment of an arbitration under Section 11 of the Act of 1996 have a very narrow scope and the same are not covered by Section 22 of the SICA (Special Provision) Act 1985 and that it is open to the respondent to take appropriate legal steps under the provisions of the Arbitration and Conciliation Act of 1996 under the law if they wish proceedings to be discontinued.
8. Merely because the arbitrator was appointed by both the parties under the provision of Section 11 would not make any difference in view of the ratio in Agio’s case (Supra) that procedings u/s 11 of the Act of 1996 can continue even if the respondent company has been declared sick under the provision of Section 22 of the SICA. In the result the application of the respondent for discontinuance of the instant proceedings can not be allowed and is hereby dismissed.
AA.No.519/99.
9. Renotify on 19th April, 2001.