OMP (ENF.) (COMM.) 146/2016 Page 1 of 23

$~

* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Judgement reserved on: 12.01.2026

Judgement delivered on: 28.01.2026

+ OMP (ENF.) (COMM.) 146/2016 & I.A. 3174/2017

(Objections on behalf of the judgment debtors under

Section 47)

ELECON ENGINEERING CO. LTD. .....Decree Holder

Through: Mr. Sanjeev K. Sharma, Mr.

Rajiv Dalal and Ms. Dipti

Singh Arya, Advocates

versus

CEMENT CORPORATION OF INDIA THROUGH

MANAGING DIRECTOR .....Judgement Debtor

Through: Mr. Jainendra Maldahiyar,

Advocate

CORAM:

HON'BLE MR. JUSTICE HARISH VAIDYANATHAN

SHANKAR

J U D G E M E N T

HARISH VAIDYANATHAN SHANKAR, J.

1. The present Execution petition has been filed by the Decree

Holder under Section 36 of the Arbitration and Conciliation Act,

1996

1

read with Order XXI Rule 11 and Section 151 of the Code of

Civil Procedure, 1908

2

, seeking enforcement of the Arbitral award

dated 15.11.1993

3

, which was made rule of the Court vide Judgment

dated 08.10.2002, passed in Suit No. 2730/1993, and subsequently

1

Act

2

CPC

3

Award

OMP (ENF.) (COMM.) 146/2016 Page 2 of 23

modified by Order dated 11.02.2004 insofar as grant of post-decretal

interest is concerned.

2. The said decree has attained finality, the challenge laid thereto

having been dismissed, and the execution is resisted by the Judgment

Debtor through I.A. No. 3174/2017, filed under Section 47 of the

CPC, by which the Judgment Debtor has raised objections to the

Execution Petition. In these circumstances, the fate of the Execution

Petition is contingent upon the outcome of the I.A. No. 3174/2017.

3. By way of the Execution Petition, the Decree Holder seeks

satisfaction of the decree by recovery of the decretal amount

aggregating to a sum of ₹1,31,75,495/-, computed in terms of the

award and the decree, together with further interest at the rate of 6%

per annum from 01.10.2016 till realization. In aid of execution, the

Decree Holder has prayed for attachment of the movable and

immovable assets of the Judgment Debtor, including the funds lying

in its bank accounts, and for consequential directions to the concerned

bank to issue a pay order in favour of the Decree Holder through this

Court, besides seeking costs of the execution proceedings.

BRIEF FACTS:

4. The disputes between the parties were referred to arbitration,

culminating in an arbitral award dated 15.11.1993 passed in favour of

the Decree Holder, whereby the Judgment Debtor was directed to pay

a sum of ₹47,00,484/- along with interest at the rate of 6% per annum,

as stipulated therein. The said award was made rule of the Court by

this Court vide judgment and decree dated 08.10.2002 passed in Suit

No. 2730/1993. Aggrieved by the said judgment, the Judgment Debtor

preferred an appeal being FAO(OS) No. 47/2003, which came to be

OMP (ENF.) (COMM.) 146/2016 Page 3 of 23

dismissed by this Court vide Order dated 31.01.2003, thereby

affirming the decree.

5. Subsequently, an application was moved by the Decree Holder

seeking clarification and modification of the decree insofar as post-

decretal interest was concerned. The said application was allowed by

this Court vide Order dated 11.02.2004, whereby interest at the rate of

6% per annum was awarded on the decretal amount from the date of

decree till realization. The decree, as modified, thus attained finality.

6. Thereafter, the Decree Holder instituted execution proceedings

being Execution Petition No. 157/2005 before this Court seeking

enforcement of the decree.

7. During the pendency of the said execution petition, the

Judgment Debtor was declared a sick industrial company and a

rehabilitation scheme was sanctioned by the Board for Industrial

and Financial Reconstruction

4

on 03.05.2006. In view thereof, the

Judgment Debtor invoked the bar contained under Section 22 of the

Sick Industrial Companies (Special Provisions) Act, 1985

5

.

Accepting the said objection, this Court dismissed Execution Petition

No. 157/2005 vide Order dated 25.09.2009 on the ground that the

execution proceedings were barred during the subsistence of the

sanctioned scheme.

8. The Decree Holder thereafter approached the BIFR by filing

Application No. 412/BC/10 dated 28.06.2010, seeking, inter alia,

payment of the decretal dues or, in the alternative, permission to

pursue execution proceedings. The said application was rejected by

the BIFR vide order dated 25.01.2011. Against the said order, an

4

BIFR

5

SICA

OMP (ENF.) (COMM.) 146/2016 Page 4 of 23

appeal was preferred before the Appellate Authority for Industrial

and Financial Reconstruction

6

which was also dismissed vide Order

dated 14.10.2015 holding that the sanctioned scheme was binding

under the provisions of the SICA.

9. Upon expiry of the period during which the statutory protection

under Section 22 of the said Act was available to the Judgment

Debtor, the Decree Holder instituted the present execution petition on

16.11.2016, seeking enforcement of the decree dated 08.10.2002 as

modified by Order dated 11.02.2004.

10. The Judgment Debtor has filed objections to the execution

under Section 47 of the CPC, which are contested by the Decree

Holder. The execution petition and the objections raised thereto are

thus placed before this Court for adjudication.

CONTENTIONS ON BEHALF OF THE DECREE HOLDER :

11. Learned counsel for the Decree Holder would contend that the

arbitral award dated 15.11.1993, made rule of the Court vide

Judgment and decree dated 08.10.2002 in Suit No. 2730/1993 and

affirmed upon dismissal of FAO (OS) No. 47/2003 on 31.01.2003,

attained finality, and the subsequent Order dated 11.02.2004 merely

clarified the grant of post-decretal interest at the rate of 6% per annum

till realization.

12. It would be contended that the Judgment Debtor is barred from

reopening either the principal liability or the entitlement to interest at

the stage of execution, as the executing court cannot go behind the

decree and the objections raised under Section 47 of the CPC are hit

by the principles of finality and res judicata.

6

AAIFR

OMP (ENF.) (COMM.) 146/2016 Page 5 of 23

13. Learned counsel would further contend that the earlier

Execution Petition, being Ex. No. 157/2005, was dismissed on

25.09.2009 solely on account of the statutory bar under Section 22 of

the SICA, and not on merits, and that upon expiry of the maximum

protection period prescribed under Section 22(3) of the SICA, the

Decree Holder’s right to execute the decree stood revived by operation

of law.

14. It would be urged that the sanctioned rehabilitation scheme

dated 03.05.2006 neither expressly subsumed the Decree Holder’s

claim nor resulted in payment of the decretal principal, and that a

defaulting judgment debtor cannot seek perpetual immunity under a

scheme which has not been implemented in accordance with its terms.

15. Learned counsel would contend that the observations made by

the BIFR or the AAIFR regarding interest do not and cannot override

or modify a judicial decree passed by this Court, particularly when the

decree itself has neither been set aside nor lawfully modified by a

competent court.

16. Reliance would be placed on the decision of the Hon’ble

Supreme Court in Fertilizer Corporation of India Ltd. & Ors. v.

Coromandal Sacks Pvt. Ltd.

7

, to submit that the protection under

SICA does not operate as a blanket bar to execution or interest where

the decree or claim has not been settled under the scheme or where the

scheme has failed or not been complied with, thereby entitling the

Decree Holder to proceed with execution.

CONTENTIONS ON BEHALF OF THE JUDGEMENT DEBTOR :

17. Learned counsel for the Judgment Debtor would contend that

7

(2024) 8 SCC 172

OMP (ENF.) (COMM.) 146/2016 Page 6 of 23

the present execution petition is not maintainable in law, as the issues

sought to be agitated stand concluded by the orders passed by the

BIFR and the AAIFR, which are binding on all parties by virtue of

Section 18(8) of the SICA.

18. It would be contended that the rehabilitation scheme sanctioned

by the BIFR on 03.05.2006 governs the rights and liabilities of all

stakeholders, and once such a scheme has attained finality, the Decree

Holder cannot seek recovery of interest or any amount dehors or

contrary to the terms of the sanctioned scheme.

19. Learned counsel would further contend that the Decree Holder,

having voluntarily approached the BIFR by filing Application No.

412/BC/10 and having accepted the adjudication therein, is estopped

from re-agitating the issue of interest before this Court, particularly

when the said issue was considered and rejected by the Board vide

Order dated 25.01.2011 and the said order was affirmed by the

AAIFR vide Order dated 14.10.2015.

20. It would be urged that during the subsistence and

implementation of the sanctioned rehabilitation scheme, the protective

umbrella under Section 22 of the SICA operated to suspend

enforcement proceedings as well as accrual and recovery of interest,

and the Decree Holder is not entitled to revive or recover interest for

the period covered by the scheme.

21. Learned counsel for the Judgment Debtor would contend that

the present execution petition suffers from suppression and

concealment of material facts, inasmuch as the Decree Holder has not

fairly disclosed the binding effect of the proceedings before the BIFR

and the AAIFR, and has sought execution in disregard of the statutory

framework under the SICA.

OMP (ENF.) (COMM.) 146/2016 Page 7 of 23

22. It would lastly be contended that grant of the interest

component in the present execution proceedings would defeat the

object and purpose of the SICA and the rehabilitation scheme

sanctioned thereunder, and would result in conferring an undue and

impermissible preference upon the Decree Holder over other

unsecured creditors.

ANALYSIS:

23. This Court has heard learned counsel for the parties at length

and has carefully examined the pleadings, the Arbitral award dated

15.11.1993, the decree dated 08.10.2002 as modified vide Order dated

11.02.2004, the earlier execution proceedings, and the orders passed

by the BIFR and the AAIFR.

24. At the outset, it is apposite to notice the Order dated 24.02.2023

passed by the learned predecessor Bench in the present proceedings,

whereby the principal amount of ₹47,00,484/- was directed to be

released in favour of the Decree Holder, subject to the outcome of the

present execution petition. The said order proceeded on the premise

that there was no dispute with regard to the principal amount awarded

under the arbitral award and crystallised by the decree, and that the

surviving controversy was confined to the claim for interest. The

relevant portions of the said order are reproduced herinbelow for

reference:

“1. The objection of the judgment debtor to execution of the award

is confined to the question of recovery of interest by the award

holder. It is the contention of Mr. Jainendra Maldahiyar, learned

counsel for the judgment debtor, that, under a scheme dated

03.05.2006, sanctioned by the Board for Industrial and Financial

Reeonstruetion [“BIFR”], the decree holder was treated as an

unsecured creditor, and it is entitled to recover only the principal

amount , of its debt, and not the amount of interest. In this

OMP (ENF.) (COMM.) 146/2016 Page 8 of 23

connection, Mr. Maldahiyar relies upon an order of BIFR dated

25.01.2011, passed on an application filed by the decree holder

herein, wherein the BIFR also came to such a conclusion. This

order was affirmed by Appellate Authority for Industrial and

Financial Reconstruction, which dismissed the appeal of the decree

holder on 14.10.2015.

*****

4. Mr. Dalal further states that, pursuant to an order dated

01.02.2019, the principal amount of Rs. 47 lakhs has been

deposited in Court, and, as there is no dispute with regard to the

said amount, he seeks release thereof. It is now contended on

behalf of the judgment debtor that the amount due to the decree

holder is, in fact, in the region of Rs. 4 lakhs. Mr. Maldahiyar,

however, concedes that no such contention has been taken in the

objections filed by the judgment debtor.

5. The award, which was passed as far back as on 15.11.1993, also

clearly recorded as follows

“In full and final settlement of the claims of M/s. Elecon

Engg. Co. Ltd. against M/s. Cement Corpn. of India Ltd. a

sum of Rs.47,00,484.00 (Forty seven lacs four hundred

eighty four only) has to be paid by M/s. Cement

Corporation of India Ltd. to the Elecon Engg. Co. Ltd.

with a simple interest at the rate of 6% (six percent) per

annum from two months after the date of award till the

date of decree or payment whichever is earlier.”

6. By orders dated 01.02.2019 and 03.05.2019, the judgment debtor

was directed to deposit the amount of Rs 47 lakhs in Court, which

was kept in an interest bearing fixed deposit.

7. The Registry is directed to release the aforesaid amount,

alongwith the accrued interest thereupon, to the decree holder upon

the decree holder filing an undertaking signed by any two of its

directors, to the effect that the release of the amount will be subject

to the result of these proceedings. The Registry is directed to take

step in this regard as expeditiously as possible.”

25. In view of the Order dated 24.02.2023, the scope of the present

proceedings is limited. The principal issue which survives for

consideration is whether the Decree Holder is entitled to execute the

decree in respect of the interest component, notwithstanding the

statutory regime governing the Judgment Debtor under the SICA and

the binding effect of the rehabilitation scheme sanctioned thereunder.

26. For the sake of convenience and clarity, this court finds it

apposite to summarise the material events and the remedies

OMP (ENF.) (COMM.) 146/2016 Page 9 of 23

successively invoked by the parties in a tabulated form hereinbelow:

Sl.

No.

Date Forum /

Proceedings

Remedy

Invoked by

DH/JD

Outcome

1. 15.11.1993 Sole Arbitrator Arbitration

proceedings

Award of

₹47,00,484/-

with interest @

6% p.a.

2. 08.10.2002 High Court of

Delhi (Suit No.

2730/1993)

Making the

award rule of the

Court

Award made the

rule of Court

3. 31.01.2003 High Court of

Delhi (FAO (OS)

No. 47/2003)

Appeal by JD

against

Judgment dated

08.10.2002

Appeal

dismissed;

decree affirmed

4. 11.02.2004 High Court of

Delhi

Modification

application by

DH

Post-decretal

interest @ 6%

p.a. clarified

5. 26.09.2005 High Court of

Delhi (Ex. No.

157/2005)

First execution

petition by DH

Dismissed on

25.09.2009 due

to SICA bar

6. 28.06.2010 BIFR (MA No.

412/BC/10)

Recovery of

principal +

interest /

permission to

execute by DH

Interest claim

rejected vide

Order dated

25.01.2011

7. 14.10.2015 Appellate

Authority for

Industrial and

Financial

Reconstruction

Appeal against

BIFR order by

DH

Dismissed;

BIFR order

affirmed

8. 16.11.2016 High Court of

Delhi (the present

execution)

Present

execution

petition by DH

Principal

released;

interest under

consideration

27. It is an admitted position that the Judgment Debtor was

OMP (ENF.) (COMM.) 146/2016 Page 10 of 23

declared a sick industrial company on 08.08.1996. Consequent

thereto, the statutory consequences under Section 22 of the SICA

came into operation. Section 22 expressly provides for suspension of

proceedings for execution, distress or recovery against a sick

industrial company during the pendency of inquiry, preparation or

implementation of a rehabilitation scheme, except with the consent of

the Board or the Appellate Authority. Section 22 of the SICA is

reproduced hereinunder for reference:

“22. Suspension of legal proceedings, contracts, etc.—(1) Where

in respect of an industrial company, an inquiry under section 16 is

pending or any scheme referred to under section 17 is under

preparation or consideration or 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 or any other 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 3 [and 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.

(2) Where the management of the sick industrial company is taken

over or changed 3 [in pursuance of any scheme sanctioned under

section 18], notwithstanding anything contained in the Companies

Act, 1956 (1 of 1956) or any other law or in the memorandum and

articles of association of such company or any instrument having

effect under the said Act or other law—

(a) it shall not be lawful for the shareholders of such

company or any other person to nominate or appoint any

person to be a director of the company;

(b) no resolution passed at any meeting of the shareholders

of such company shall be given effect to unless approved

by the Board.

(3) 1 [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 thereunder, for due implementation of the

OMP (ENF.) (COMM.) 146/2016 Page 11 of 23

scheme, the Board may by 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 thereunder 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:

Provided that such declaration shall not be made for a

period exceeding two years which may be extended by one year at

a time so, however, that the total period shall not exceed seven

years in the aggregate.

(4) Any declaration made under sub-section (3) with respect to a

sick industrial company shall have effect notwithstanding anything

contained in the Companies Act, 1956 (1 of 1956) or any other

law, the memorandum and articles of association of the company

or any instrument having effect under the said Act or other law or

any agreement or any decree or order of a court, tribunal, officer or

other authority or of any submission, settlement or standing order

and accordingly,—

(a) any remedy for the enforcement of any right, privilege,

obligation and liability suspended or modified by such

declaration, and all proceedings relating thereto pending

before any court, tribunal, officer or other authority shall

remain stayed or be continued subject to such declaration;

and

(b) on the declaration ceasing to have effect—

(i) any right, privilege, obligation or liability

so remaining suspended or modified, shall

become revived and enforceable as if the

declaration had never been made; and

(ii) any proceeding so remaining stayed shall

be proceeded with, subject to the provisions of

any law which may then be in force, from the

stage which had been reached when the

proceedings became stayed.

(5) In computing the period of limitation for the enforcement of

any right, privilege, obligation or liability, the period during which

it or the remedy for the enforcement thereof remains suspended

under this section shall be excluded.”

28. This Court notes that the lis between the parties must be

appreciated in the backdrop of the distinct statutory milestones that

unfolded over time and progressively re-defined the rights and

OMP (ENF.) (COMM.) 146/2016 Page 12 of 23

obligations of the stakeholders. This Court is of the view that the

arbitral award, though having culminated in a decree of this Court, did

not operate in a legal vacuum. In the interregnum, the Judgment

Debtor was brought within the fold of the SICA and a rehabilitation

scheme was sanctioned by the BIFR on 03.05.2006. With the sanction

of the scheme, the statutory regime governing sick industrial

companies assumed primacy and the scheme, by legislative mandate,

acquired binding force over the sick industrial company as well as all

its creditors, including unsecured creditors.

29. The coming into operation of the sanctioned scheme marked a

decisive legal watershed. The rights of the parties, hitherto traceable to

the decree passed by this Court, stood subsumed within the statutory

architecture of revival envisaged under the Act. The scheme was not a

mere administrative arrangement but a statutory instrument imbued

with overriding efficacy, intended to balance competing claims in

furtherance of the larger public interest of industrial revival. It is in

this setting that the earlier Execution Petition bearing No. 157/2005,

was dismissed by this Court vide Order dated 25.09.2009, not as a

reflection on the merits of the Decree Holder’s claim, but in obedience

to the moratorium imposed under Section 22 of the SICA and the

legislative imperative that individual enforcement must yield to

collective rehabilitation.

30. The binding nature of the sanctioned scheme flows directly

from the statuatory regime, which unequivocally mandates that a

sanctioned scheme shall be binding on the sick industrial company as

well as on all its creditors, including unsecured creditors. In similar

circumstances, where claims founded upon decrees were sought to be

enforced dehors the rehabilitation framework, courts have consistently

OMP (ENF.) (COMM.) 146/2016 Page 13 of 23

upheld the primacy of the sanctioned scheme, confining recovery

strictly to what the scheme permits. The statutory force of a scheme

sanctioned by the Board has been recognised by the Allahabad High

Court in J.K. Cotton Spg. And Wvg. Mills Co.Ltd. v. State of U.P. &

Ors.

8

, wherein it was held that a rehabilitation scheme overrides

contractual obligations and ordinary civil decrees to the extent of any

inconsistency. The relevant portion of the said judgment reads as

follows:

“Insofar as the question of principal dues are concerned, there is no

dispute before this Court. Sri Upadhyay has stated that the

principal dues have already been paid. That only leaves the Court

to consider whether the impugned demand insofar as it levies

interest and damages is sustainable.

Undisputedly, the Sanctioned Scheme restricts the liability of the

petitioner in respect of ESI dues to the principal amount only with

interest and penal levies being specifically and unambiguously

excluded. The provision of the Scheme as sanctioned in terms of

Section 32 of SICA would clearly bind and override all other

statutes and instruments mandating to the contrary. This is manifest

from the plain language employed in that provision which reads

thus: -

“S. 32. Effect of the Act on other laws.- (1) The provisions

of this Act and of any rules or schemes made thereunder

shall have effect notwithstanding anything inconsistent

therewith contained in any other law except the provisions

of the Foreign Exchange Regulation Act, 1973 (46 of

1973), and the Urban Land (Ceiling and Regulation) Act,

1976 (33 of 1976) for the time being in force or in the

Memorandum or Articles of Association of an industrial

company or in any other instrument having effect by

virtue of any law other than this Act…..”

(emphasis supplied)

Section 32, in unambiguous terms statutorily confers overriding

authority to schemes sanctioned under SICA notwithstanding

anything inconsistent in any other law. The only statutes which

stand saved from the position of preeminence conferred to schemes

sanctioned under SICA are the Foreign Exchange Regulation Act,

1973 and the Urban Land (Ceiling and Regulation) Act, 1976.

While the law on this issue is well settled, the Court deems it

apposite to only notice two decisions referred to hereinafter. In

8

WRIT - C No. - 18094 of 2004

OMP (ENF.) (COMM.) 146/2016 Page 14 of 23

Raheja Universal Vs. NRC, the Supreme Court enunciated the

legal position as follows: -

“[37] This Court has taken the view in Tata Motors Ltd.,

(2008) 7 SCC 619 that the Act of 1985 has been enacted to

secure the principles specified in Article 359 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. As the Act of 1985 is a special law

and on the principle that a special law will prevail over a

general law, it is permissible to contend that even if the

provisions contained in Section 22(1) read with Section 32

of the Act, giving overriding effect vis-à-vis the other

laws, other than the Foreign Exchange Regulation Act,

1973 and the Urban Land Ceiling and Regulation Act,

1976 had not been there, the provisions of the general law

like the Companies Act, for regulation, incorporation,

winding-up etc. of the companies would have still been

overridden to the extent of inconsistency. We have already

seen that this Court had, in the case of Jay Engineering,

taken the view that the Interest on Delayed Payments to

Small Scale and Ancillary Industries Undertaking Act,

1993 shall have to give way for enforcement of the

provisions of the Act of 1985. In the case of Tata Davy

also, the Court took the view that the State Sales Tax Act

would have to be read and construed in comity to the

provisions of the Act of 1985 which shall have the

overriding effect. In the case of Tata Motors Ltd. v.

Pharmaceuticals Product of India Ltd., this Court was

concerned with the provisions of mismanagement and

oppression contained in Sections 391 and 394 of the

Companies Act and whether the Company Court will have

the jurisdiction to pass orders in preference to the

proceedings pending before the Court under the Act of

1985. The Court while holding the primacy of the Act of

1985 held as under:-

“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.

What scheme should be prepared by the

operating agency for revival and rehabilitation

of the sick 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.

OMP (ENF.) (COMM.) 146/2016 Page 15 of 23

23. The jurisdiction of 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.”

A Division Bench of the Court in J.K. Cotton Weaving &

Spinning Mills Vs. Union of India was called upon to consider

the validity of a demand raised by Excise authorities inconsistent

with the provisions made in a Sanctioned Scheme. Dealing with

that question the Court held: -

“6. A perusal of the said Scheme would show that as per

the terms and conditions of the Rehabilitation Scheme it

was provided that the respondent-department would grant

exemption to the petitioner-company from payment of

interest, penalty etc. and accept payment of excise duty

finally payable in pending cases over a period of 2 years

from the year in which such amount becomes payable.

7. It was contended that in view of the Scheme and the

specific provisions contained in Clause 8.04(d), the

impugned demand for Rs.6,89,000/- was absolutely illegal

and in violation of the specific terms and conditions of the

Rehabilitation Scheme.

...

27. The question that now remains for consideration of

this Court is that whether the petitioner is liable for

payment of interest and penalty as demanded by the

impugned notice dated 17-6-2005.

28. As already noticed in Clause 8.04 (d) of the

Rehabilitation Scheme dated 12-11-2002 framed by the

BIFR, the petitioner is not liable for payment of interest

and penalty. Section 22 of the Act clearly provides that

once proceedings have been initiated under the Act and an

inquiry under Section 16 is pending or any Scheme

referred to under Section 17 is under preparation or

consideration or a sanctioned Scheme is under

implementation then, notwithstanding anything contained

in any other law for the time being in force no proceeding

for the winding up or execution or distress or the like

against any of the properties of the industrial undertaking

company and no proceedings for recovery of money or for

enforcement of any security against the company etc. shall

be maintainable.

29. Section 32 of the act further provides that the Schemes

made under the Act shall have effect notwithstanding

anything inconsistent therewith contained any other law

except two Acts namely FERA and Urban Land Ceiling

Act for the time being in force and Memorandum or

Articles of Association of an Industrial Company or in any

OMP (ENF.) (COMM.) 146/2016 Page 16 of 23

other instrument having effect by virtue of any other law

other than this Act. The Excise Act has not been exempted

from the applicability of section 32 of the Act.

...

35. In our opinion, the judgment referred to in the case of

Voltas Ltd.(supra) was on its own facts and does not help

the respondents inasmuch as in the Scheme under

consideration before the Apex Court, there was no express

waiver from the statutory liability of payment of interest at

the rate of 18%. However, in the case before us the

provisions of Clause 8.04(d) of the Rehabilitation Scheme

contains an express waiver from payment of interest,

penalty etc. and to accept payment of excise duty finally

payable in pending cases over a period of 2 years, from the

year in which such amount becomes payable.

36. The petitioner having already deposited a sum of

Rs.6,89,000/- as 50% part payment for 2004-2005 and

having given an undertaking for payment of remaining

50% amount of Rs.689000/- which also was paid on 6-3-

2006 (Annexure-SA1 to the supplementary affidavit) the

liability towards payment of excise duty had been duly

discharged as per the demand notice and the company was

not liable for payment of penalty or interest in terms of the

specific provisions of the Rehabilitation Scheme.”

The necessary corollary to the enunciation of the statutory position

noticed above would be that the liability of the petitioner insofar as

ESI dues are concerned would be governed exclusively by the

provisions made in the Sanctioned Scheme in that respect. That

Scheme admittedly absolves the petitioner from the liability

towards interest and penalties under the Act………

*****

In light of the legal position noticed above, the Court is of the

considered view that the impugned demand insofar as it places a

burden of interest and damages upon the petitioners cannot be

sustained.”

31. It is also of significance that the Decree Holder availed the

statutory remedies available under the SICA by approaching the BIFR

during the subsistence of the sanctioned rehabilitation scheme. The

claim of the Decree Holder, including its prayer for recovery of

interest on the decretal amount, was specifically examined by the

Board and came to be rejected vide Order dated 25.01.2011. The

Board held that the sanctioned scheme contemplated payment only of

OMP (ENF.) (COMM.) 146/2016 Page 17 of 23

the principal amounts and that the Decree Holder was required to be

treated at par with other unsecured creditors, without any entitlement

to interest. The relevant finding of the BIFR reads as under:

“It is evident that secured creditors and unsecured creditors are not

eligible for any interest... The company (Elecon Engineering Co.

Ltd.) is not eligible for payment of any interest and their dues have

to be treated at par as per other unsecured creditors covered under

the scheme.”

32. The said determination was also tested in appeal before the

AAIFR. The Appellate Authority, vide its Order dated 14.10.2015,

affirmed the findings of the BIFR and reiterated that the rehabilitation

scheme sanctioned in 2006 was binding on all parties in terms of

Statuatory mandate. The AAIFR explicitly noted that the Decree

Holder, having not challenged the Sanctioned Scheme at the relevant

time, could not seek a dispensation different from other unsecured

creditors. With the dismissal of the Appeal, the claim of the Decree

Holder stood conclusively adjudicated by the competent statutory

fora, and the remedies available under the special statute were thus

fully exhausted. The relevant finding of the AAIFR reads as under:

“The sanctioned scheme, as it exists, does not provide for any

payment of interest on account of delay. As such, any dispensation

for payment of interest to the appellant would amount to

modification in the sanctioned scheme which cannot be done at this

belated stage.”

33. It is a trite law that after the commencement of the revival

scheme as per the provision of SICA, all the claims, including

execution proceedings, will proceed only with the consent of BIFR

and AAIFR. In the present case, both BIFR and AAIFR have only

allowed for recovery of the principal amount. Therefore, this Court is

of the view that the Decree Holder cannot be permitted to recover the

interest amount not approved in the scheme of rehabilitation in the

OMP (ENF.) (COMM.) 146/2016 Page 18 of 23

present execution proceedings.

34. At this juncture, this Court finds it apposite to refer to the

judgement of the Hon’ble Supreme Court in Modi Rubber Ltd. v.

Continental Carbon (India) Ltd.

9

, wherein a closely analogous issue

arose for consideration. The question before the Apex Court was

whether, upon approval of a rehabilitation scheme by the BIFR under

the SICA, an unsecured creditor could decline to accept the scaled-

down value of its dues under the scheme and instead await the

financial revival of the sick company with a view to recovering the

debt along with interest after the scheme had run its course. The

Hon’ble Supreme Court answered the said question in the negative,

holding that a sanctioned scheme binds all creditors and that no

unsecured creditor can be permitted to stand outside the scheme or

revive claims not provided for therein once the scheme attains finality.

The relevant portions of the said judgement are extracted below:

“49. Thus, the intention of the legislature is very clear. Creditors

includes unsecured creditors. The submission on behalf of the

unsecured creditors that the word “creditors” is not defined like

IBC, 2016 and therefore, the scheme shall not bind the unsecured

creditors, cannot be accepted. Looking to the object and purpose of

the SICA, 1985 and the provisions of Sections 18 and 19 SICA,

1985, the word “creditors” shall have to be construed in a broad

manner and is not required to be construed narrowly, otherwise, the

object and purpose of rehabilitation scheme shall be frustrated. If

the scheme binds the creditors, including other creditors like

financial institutions, etc. who may have a better claim than the

unsecured creditors, there is no reason to treat the unsecured

creditors separately and not to treat them as creditors. Therefore,

even as per Section 18(8), the scheme shall bind all the creditors

and guarantors and even the employees of the sick company, for

whose revival the scheme is sanctioned.

50. If the submission on behalf of the unsecured creditors, which

has been accepted by the High Court in Continental Carbon 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

9

2023 SCC OnLine SC 296

OMP (ENF.) (COMM.) 146/2016 Page 19 of 23

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 the SICA, 1985.

51. At the cost of repetition, it is observed that the primary object

and purpose of the SICA, 1985 is revival of a sick industrial

company even by providing rehabilitation scheme under Section

18. A reading of the Statement of Objects and Reasons says that

the effect of the ill-effects of sickness in industrial companies was

a serious concern not only to the Government but also to the

society at large. Therefore, it was found that there is a need to fully

utilise the productive industrial assets; afford maximum protection

of employment and optimise the use of the funds of the banks and

financial institutions and it is imperative to revive and rehabilitate

the potentially viable sick industrial companies. Considering

Section 20 of the Act it becomes clear that winding up of a

company is only resorted to as a last resort and only when it is just

and equitable to wind up the sick industrial company.

52. 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.

53. 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 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 creditor, 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.

54. 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

OMP (ENF.) (COMM.) 146/2016 Page 20 of 23

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.

55. 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 300-A 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 SICA, which has a binding effect on all the creditors.

Therefore, the same cannot be said to be violative of Article 300-

A 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 of Article 300-A of the Constitution of

India as submitted on behalf of the unsecured creditors.

56. In view of the above and for the reasons stated above, the view

taken by the High Court of Delhi in Continental Carbon

that on

approval of a scheme by the BIFR under the Sick Industrial

Companies (Special Provisions) Act, 1985, the unsecured creditors

have 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

the SICA, 1985 and the same deserves to be quashed and set aside

and is accordingly quashed and set aside.

57. It is observed and held that the rehabilitation scheme under

Section 18 SICA, 1985 shall bind all the creditors including the

unsecured creditors and the unsecured creditors have to accept the

scaled-down value of its dues provided under the rehabilitation

scheme.”

(emphasis added)

35. Keeping in view the aforesaid, the claim of the Decree Holder

for interest is wholly untenable in view of the law laid down by the

Supreme Court in Modi Rubber (supra). The Hon’ble Supreme Court

has categorically held that a rehabilitation scheme sanctioned under

the SICA is binding on all creditors, including unsecured creditors,

OMP (ENF.) (COMM.) 146/2016 Page 21 of 23

and that no creditor can be permitted to stand outside the scheme or

defer enforcement of its claim with a view to resurrecting liabilities

not provided for therein. Any interpretation enabling an unsecured

creditor to claim amounts beyond the sanctioned scheme was

expressly rejected as being destructive of the statutory objective of

rehabilitation. Applying the said principle, this Court has no hesitation

in holding that the interest component, having been expressly

excluded and finally adjudicated under the sanctioned scheme, stands

extinguished and cannot be claimed or enforced by the Decree Holder

in execution proceedings.

36. The contention advanced on behalf of the Decree Holder that

the repeal of the SICA or the alleged closure of the rehabilitation

scheme upon lapse of seven years renders the findings recorded by the

BIFR and the AAIFR otiose cannot be accepted. Such a submission

overlooks the express saving provisions governing the repeal as

provided in Sick Industrial Companies (Special Provisions) Repeal

Act, 2003. The repeal does not efface or invalidate rehabilitation

schemes already sanctioned thereunder. On the contrary, the saving

framework, read with Section 252 of the Insolvency and Bankruptcy

Code, 2016, expressly preserves the continuity and binding effect of

sanctioned schemes.

37. The statutory intent is thus unambiguous that schemes

sanctioned under the repealed enactment continue to operate and

remain enforceable notwithstanding the repeal, and are accorded legal

efficacy under the successor insolvency regime. Consequently, the

determinations rendered by the BIFR and affirmed by the Appellate

Authority, having attained finality within the governing statutory

framework, cannot be reopened or diluted on the specious plea of

OMP (ENF.) (COMM.) 146/2016 Page 22 of 23

repeal of the Act or efflux of time.

38. This position stands further reinforced by the judgement of the

Hon’ble Supreme Court in Committee of Creditors of Essar Steel

India Limited v. Satish Kumar Gupta & Ors.

10

, wherein the Court

emphatically affirmed the “fresh slate” doctrine. The Hon’ble

Supreme Court held that once a resolution plan attains approval, no

fresh claims can be entertained and no past claims, which do not find

place in the plan, can be permitted to be revived. The Apex Court

emphasized that the sanctity and finality of an approved resolution

plan must be preserved in order to enable the corporate debtor to

function as a going concern, unencumbered by legacy liabilities not

contemplated therein. When read in conjunction with the saving and

continuation provisions applicable to rehabilitation schemes

sanctioned under the SICA, the said principle lends further support to

the conclusion that claims not recognised under the sanctioned scheme

cannot be reagitated or enforced through execution proceedings.

39. This Court also finds it necessary to observe that, during the

course of the proceedings, the Decree Holder neither pointed out nor

disclosed the material and germane fact that its specific claim for

interest had already been considered and rejected by the statutory

authorities, namely the BIFR and the AAIFR. The existence and

outcome of these proceedings were brought to the notice of this Court

only at the instance of the Judgment Debtor. It is well settled that a

party invoking the equitable jurisdiction of the Court, particularly in

execution proceedings, is required to approach the Court with

complete candour and clean hands. The non-disclosure of the adverse

10

(2020) 8 SCC 531

OMP (ENF.) (COMM.) 146/2016 Page 23 of 23

determinations rendered by the competent statutory fora, which had a

direct bearing on the relief now sought, does not comport with the

standard of fairness and transparency expected of a litigant before this

Court.

40. In view of the foregoing analysis, this Court has no hesitation in

holding that the execution of the decree insofar as it pertains to the

interest component cannot be sustained in law. The Decree Holder

remains bound by the terms of the sanctioned rehabilitation scheme

and the final determinations rendered thereunder, and no relief

contrary thereto can be granted in the present execution proceedings.

CONCLUSION:

41. In view of the foregoing, the objections filed through I.A. No.

3174/2017 by the Judgment Debtor are allowed.

42. Accordingly, the Execution Petition, being OMP (ENF.)

(COMM.) No. 146/2016, filed by the Decree Holder, to the extent,

seeking recovery of interest in terms of the decree passed by this

Court confirming the Arbitral Award dated 15.11.1993, is dismissed.

43. The present application, along with pending applications, if any,

stands disposed of in the above terms.

44. No order as to costs.

HARISH VAIDYANATHAN SHANKAR, J.

JANUARY 28, 2026/sm/kr