1. Applicability of Section 22(1) of the Sick Industrial Companies Act, 1985 (SICA) – Whether the bar on legal proceedings under Section 22 applies to a civil suit for the recovery of money against a sick industrial company where the debt is disputed.
2. High Court’s Award of 24% Compound Interest – Whether the High Court's decision to award 24% compound interest on delayed payments to the plaintiff was legally valid.

3. Factual Matrix (Para 1-6)

   • The dispute arose from orders placed by Fertilizer Corporation of India Limited (FCIL), a public sector undertaking, for the supply of HDPE bags by Coromandal Sacks Pvt. Ltd. (the plaintiff). FCIL delayed payments, leading to deductions for liquidated damages, and Coromandal filed a suit for recovery of the unpaid amounts and interest.

4. Case before the Trial Court (Para 7-14)

   • Coromandal sought Rs. 18,58,903.88 as unpaid dues, including interest. The Trial Court ruled in their favor, allowing parts of their claim with interest at 12%. FCIL argued that the suit was barred by Section 22(1) of SICA, as it was undergoing proceedings before the Board for Industrial and Financial Reconstruction (BIFR).

5. Proceedings before the High Court (Para 15-18)

   • Both parties appealed. The High Court upheld parts of the Trial Court's decision but awarded Coromandal 24% compound interest, citing the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993.

6. Legal Submissions by the Appellant (FCIL) (Para 20-29)

   • FCIL contended that the Trial and High Courts erred in ignoring the bar under SICA's Section 22(1), which protected FCIL, a sick company, from legal proceedings without BIFR's consent. They also challenged the 24% interest rate as excessive.

7. Legal Submissions by the Respondent (Coromandal) (Para 31-37)

   • Coromandal argued that Section 22(1) only applies to acknowledged debts, which FCIL had not admitted. Therefore, the jurisdictional bar did not apply. They defended the 24% interest, citing statutory provisions meant to protect small-scale industries from delayed payments.

8. Analysis of the Court (Para 39-44)

   • The Court first considered the legislative framework of SICA and its application to FCIL, which was declared a sick company in 1992. The BIFR proceedings were ongoing during the civil suit, meaning Section 22(1) could apply to suspend the suit.

9. Key Issues for Determination (Para 45-48)

   • (i) Did Section 22(1) bar the suit for recovery of disputed amounts?
   • (ii) Was the High Court right to award 24% compound interest?

10. Issue 1: Bar under Section 22(1) of SICA (Para 62-73)

    • The Court examined whether the suspension of legal proceedings under Section 22 extended to civil suits for disputed debts. The Court highlighted previous judgments interpreting SICA, emphasizing that the intent of Section 22 is to prevent coercive legal actions that might interfere with a company's recovery process.

11. Issue 2: Award of Compound Interest (Para 74-80)

    • The Supreme Court scrutinized the High Court's decision to grant 24% interest. While the Interest on Delayed Payments Act allowed for higher rates to support small-scale industries, the Court considered whether the specific rate was justifiable.

Acts and Sections Discussed:

• Sick Industrial Companies (Special Provisions) Act, 1985

  • Section 22(1): Suspension of legal proceedings against a sick company without BIFR’s consent.

• Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993

  • Provides for 24% interest on delayed payments to small industries.

• Civil Procedure Code, 1908

  • The Court also referenced inherent powers of civil courts to adjudicate money suits unless specifically barred by law.

Ratio Decidendi:

1. Section 22(1) of SICA prevents legal proceedings for debt recovery against a sick company while proceedings are ongoing before BIFR. However, the Court needs to determine whether the debt is admitted or disputed.

2. 24% Compound Interest: While permissible under the law for small-scale industries, the Supreme Court evaluated whether such a high rate was appropriate in this case.

Subjects:

#SICA #BIFR #CompoundInterest #IndustrialSickness #SmallScaleIndustries #DebtRecovery #FertilizerCorporation