http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 13

PETITIONER:

SHREE CHAMUNDI MOPEDS LTD.

Vs.

RESPONDENT:

CHURCH OR SOUTH INDIA TRUST ASSN. CSI CINODSECRETARIAT, MADR

DATE OF JUDGMENT29/04/1992

BENCH:

AGRAWAL, S.C. (J)

BENCH:

AGRAWAL, S.C. (J)

KASLIWAL, N.M. (J)

PUNCHHI, M.M.

CITATION:

1992 AIR 1439 1992 SCR (2) 999

1992 SCC (3) 1 JT 1992 (3) 98

1992 SCALE (1)947

ACT:

Sick Industrial Companies (Special Provisions) Act,

1985-Section 22(1)-Eviction proceedings against sick

industrial company under Section 21, Karnataka Rent Control

Act, 1961-Whether eviction proceedings to be suspended.

Sick Industrial Companies (Special provisions) Act,

1985-Section 22(1)-Interest of sick industrial company, a

tenant under the Karnataka Rent Control Act whether

property.

Sick Industrial Companies (Special Provisions) Act,

1985-Section 22(1)-Object and purpose and legislative

intention of.

HEADNOTE:

The appellant-company took the premises of the

respondent No.1 on a monthly rent of Rs. 21,159. The

company committed default in payment of rent. The

respondents issued a legal notice asking the appellant

company to pay the rent dues. The company replied that the

outstanding rent dues would be paid as soon as it would

receive the developmental loan from the Government.

When the amount was not paid, the respondents issued a

notice to the company under section 434 of the Companies

Act. Thereafter a petition was filed under section 433 of

the Act in the High Court of Karnataka for winding up of the

company.

Meanwhile, on 12.12.1988, the appellant-company filed a

reference under section 15(1) of the Sick Industrial

Companies (Special Provisions) Act before the Board of

Industrial and Financial Reconstruction claiming that it

became a sick industrial company.

The Board held that the company had become economically

and commercially non-viable due to its accumulated losses

and liabilities and it was to be wound up. Giving one more

opportunity to the promoters, the

1000

Board further held that if no acceptable rehabilitation

scheme was received within one month, then the Board would

forward its opinion to wind up the Company to the High

Court.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 13

The appellant-company filed an appeal before the

Appellate Authority for Industrial and Financial

Reconstruction against the order of the Board. Its appeal

was dismissed by the Appellate Authority. Against the Order

of the Appellate Authority the company filed a writ petition

(W.P.(C) No. 94/91) in the High Court of Delhi.

The High Court stayed the operation of the order of the

Appellate Authority.

(When the present case was before this Court, the writ

petition was pending and the stay order was operative).

After the dismissal of the appeal by the appellate

Authority, the Single Judge of the Karnataka High Court took

up the petition filed by the respondents under section 433

of the Companies Act for winding up of the company and the

same was allowed holding that pendency of the writ petition

in the High Court of Delhi and the stay of operation of the

order of the Appellate Authority did not stand in the way of

the Court.

The appellant-company's appeal before the Division

Bench of the Karnataka High Court was dismissed. Against

the said order of the Division Bench of the High Court the

appellant, by special leave, filed CA No. 126 of 1992.

On 26.2.1988, before the Additional Small Cause Court,

the landlord-respondents filed an eviction petition under

Section 21(1) of the Karnataka Rent Control Act, 1961 on the

ground that the tenant-appellant-company was a defaulter in

the payment of rent; that as on 31.3.1987, the arrears of

rent was Rs. 2,45,534 and that the company's cheque for a

sum of Rs. 50,000 when presented for encashment, was

dishonoured.

The appellant-company moved an application under

section 151, read with section 22 of the Sick Industrial

Companies (Special Provisions) Act, 1985 for stay of the

eviction proceedings on the ground that the company was

declared a sick industrial company by the Board and a scheme

under Section 16 of the Act was under preparation.

1001

The trial court rejected the tenant-company's

application holding that section 22 of the Act had no

application inasmuch as proceedings instituted by the

landlord for recovery of possession of the premises, of

which a sick industrial company was a tenant, was not

included among the proceedings which were required to be

suspended under section 22(1) of the Act.

The trial court allowed the eviction petition of the

landlord-respondents.

The tenant-company filed a writ petition (subsequently

converted into a revision under section 50 of the Karnataka

Rent Control Act) against the order of the trial court.

The revision was dismissed by the Karnataka High Court

holding that the tenant was not entitled to file a revision

petition against an order made under Section 21 of the

Karnataka Rent Control Act, unless the arrears of rent were

paid and that the stay order of the Delhi High Court did not

entitle the appellant company to invoke the protection under

section 22 of the Sick Industrial Companies (Special

Provisions) Act.

Against the said order of the High Court in revision

the company by special leave, filed CA No. 2553/1991.

The appellant-company urged that the eviction

proceedings were automatically suspended under section 22(1)

of the Sick Industrial Companies (Special Provisions) Act,

as the proceedings were for execution, distress or the like

against the properties of the sick industrial company in the

premises leased out to it was property and since the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 13

eviction proceedings would result in the company being

deprived of the property, the eviction proceedings would be

covered by the second category of the proceedings mentioned

in section 22(1) of the Act.

Two questions arose for consideration in the appeals :

(1) The effect of the order passed by the Delhi High Court

dated February 21, 1991 staying the operation of the order

dated January 7, 1991 passed by the Appellate Authority :

and (2) Whether the proceedings instituted by a landlord for

eviction of a tenant who is a sick company from the premises

let out to it, are required to be suspended under Section

22(1) of the Act.

While the first question arose in both the appeals, the

second ques-

1002

tion alone arose for consideration in C.A. No. 2553 of 1991.

Dismissing both the appeals, the Court,

HELD : 1.(a) Section 22(1) is applicable, in respect

of an industrial company, where (i) an inquiry under Section

16 is pending; or (ii) a scheme referred to in Section 17 is

under preparation or consideration; or (iii) a sanctioned

scheme is under implementation; or (iv) where an appeal

under Section 25 relating to the industrial company is

pending. In that event no proceedings for winding up of the

industrial company or for execution, distress or the like

against any of the properties of the industrial company or

for appointment of receiver, in respect thereof shall lie or

be proceeded with further. This injunction is, however,

subject to the exception that the proceedings can be

instituted or proceeded further with the consent of the

Board or the Appellate Authority. In other words, there is

no absolute bar to the institution of proceedings referred

to in Section 22(1) and for the operation of the bar imposed

by the said section it is necessary that one of the matters

referred to therein should be pending so that directions may

be obtained either from the Board or the Appellate Authority

for institution of or continuation of a proceeding of the

type specified in Section 22(1). [1010 E-G]

In the instant case, the proceedings before the Board

under Section 15 and 16 of the 1985 Act had been terminated

by order of the Board dated April, 26, 1990 whereby the

Board, upon consideration of the facts and material found

that the appellant company had become economically and

commercially non-viable due to its huge accumulated losses

and liabilities and should be wound up. The appeal filed by

the appellant-company under Section 25 of the Act against

said order of the Board was dismissed by the Appellate

Authority by order dated January 7, 1991. As a result

thereof, no proceedings under the Act were pending either

before the Board or before the Appellate Authority on

February 21, 1991 when the Delhi High Court passed the

interim order staying the operation of the Appellate

Authority dated January 7, 1991. [1010 H-1011 B]

(b) Quashing of an order results in the restoration of

the position as it stood on the date of the passing of the

order which has been quashed. The stay of operation of an

order does not, however lead to such a result. It only means

that the order which has been stayed would not be operative

from the date of the passing of the stay order and it does

not mean that the said order has been wiped out from

existence. [1011 D]

1003

In the instant case, the passing of the interim order

dated February 21, 1991 by the Delhi High Court staying the

operation of the order of the Appellate Authority dated

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 13

January 7, 1991 does not have the effect of reviving the

appeal which had been dismissed by the Appelate Authority by

its order dated January 7, 1991 and it cannot be said that

after February 21, 1991 the said appeal stood revived and

was pending before the Appellate Authority. It cannot

therefore be said that any proceedings under the Act were

pending before the Board or the Appellate Authority on the

date of the passing of the order dated August 14, 1991 by

the Single Judge of the Karnataka High Court for winding up

of the company or on November 6, 1991 when the Division

Bench passed the order dismissing the appeal by the

Appellant-company against the order of the Single Judge

dated August 14, 1991. [1011 G-1012 A]

(c) Section 22(1) of the Act could not, therefore, be

invoked and there was no impediment in the High Court

dealing with the winding up petition filed by the

respondents. [1012 B]

2.(a) The following proceedings only are automatically

suspended under Section 22(1) of the Act : (i) Proceedings

for winding up of the industrial company ; (ii) Proceedings

for execution, distress or the like against the properties

of the sick industrial company ; and (iii) proceedings for

the appointment of receiver. [1012 F]

(b] Eviction proceedings initiated by a landlord

against a tenant company would not fall in categories (i)

and (iii) referred to above. Do they fall in the second

category which contemplates proceedings for execution,

distress or the like against any other properties of the

industrial company. The words `or the like' have to be

construed with reference to the preceding words, namely `for

execution, distress' which means that the proceedings which

are contemplated in this category are proceedings whereby

recovery of dues is sought to be made by way of execution

distress or similar process against the property of the

company. Proceedings for eviction instituted by a landlord

against a tenant who happens to be a sick industrial

company, cannot, therefore be regarded as falling in this

category. [1012 G, 1013 B, C]

(c) The Sick Industrial Companies (Special Provisions)

Act, 1985 has been enacted as is evident from the Preamble,

to make special provisions with a view to securing the

timely detection of sick and potentially sick companies

owning industrial undertakings, the speedy deter-

1004

mination by a Board of experts of the preventive,

ameliorative, remedial and other measures which need to be

taken with respect to such companies and the expeditious

enforcement of the measures so determined. [1013 D]

(d) The provision regarding suspension of legal

proceedings contained in Section 22(1) seeks to advance the

object of the Act by ensuring that a proceeding having an

effect on the working or the finances of a sick industrial

company shall not be instituted or continued during the

period the matter is under consideration before the Board or

the Appellate Authority or a sanctioned scheme is under

implementation without the consent of the Board or the

Appellate Authority. [1013 E]

(e)(i) It could not be the intention of Parliament in

enacting the said provision to aggravate the financial

difficulties of a sick industrial company while the matters

were pending before the Board or the Appellate Authority by

enabling a sick industrial company to continue to incur

further liabilities during this period. [1013 F]

(e)(ii) Section 22(1) of the Sick Industrial Companies

(Special Provisions) Act, 1985 does not cover a proceeding

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 13

instituted by a landlord of a sick industrial company for

the eviction of the company premises let out to it. [1014 A]

(f) From Section 23(1), of the Karnataka Rent Control

Act, 1961 it would appear that except in cases covered by

the two provisos to subsection (1) of Section 23, there is

a prohibition for a tenant to sub-let whole or any part of

the premises let to him or to assign or transfer in any

manner his interest therein. This prohibition is, however,

subject to a contract to the contrary. A tenant who sublets

or assigns or transfers the premises in contravention of

this prohibition loses the protection of law and can be

evicted by the landlord under Section 21(1)(f). [1015 G]

(g) In the case of a statutory tenant, the relationship

is not governed by contract. The prohibition against

assignment and transfer is, therefore, absolute and the

interest of a statutory tenant can neither be assigned nor

transferred. This means that the interest of the statutory

tenant in the premises in his occupation, as governed by the

Karnataka Rent Control Act is a limited interest which

enables the surviving spouse or any son or daughter or

father or mother of a deceased tenant who had been living

1005

with the tenant in the premises as a member of the tenant's

family up to the death of the tenant and a person continuing

in possession after the termination of the tenancy in his

favour, to inherit the interest of the tenant on his death.

[1015 H-1016 B]

(h) The interest of a company which is continuing in

occupation of the premises as a statutory tenant by virtue

of the protection conferred by the Karnataka Rent Control

Act cannot be regarded as property of the company for the

purpose of sub-section (1) of Section 22 of the Act and for

that reason also the provisions of Section 22(1) were not

attracted to the eviction proceedings instituted by the

respondents against the appellant-company. [1016 B, C]

In the instant case, the provisions of Section 22(1)

did not, therefore, bar the prosecution of the proceedings

by the respondents and the order dated September 30, 1989

passed by the XII Additional Small Cause Judge, Bangalore

allowing the eviction petition cannot be held to have been

passed in contravention of the provisions of Section 22(1)

of the Act. [1016 C, D]

Smt. Gian Devi Anand v. Jeevan Kumar & Ors., [1985]

Supp. 1 SCR 1, referred to.

JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2553 of

1991.

From the Judgment and Order dated 15.3.1991 of the

Karnataka High Court Civil Revision Petition No. 582 of

1991.

C.N. Sree Kumar for the Appellant.

K. Madhava Reddy, N.K. Gupta and N.D.B. Raju for the

Respondents.

The Judgment of the Court was delivered by

S.C. AGRAWAL, J. These appeals filed by M/s Shree

Chamundi Mopeds Ltd. raise questions involving the

interpretation of Section 22 of the Sick Industrial

Companies (Special Provisions) Act, 1985, hereinafter

referred to as `the Act'.

The appellant is a public limited company registered

under the Companies Act, 1956,. It was set up with the

object of manufacturing

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 13

1006

mopeds in collaboration with Cycle Peugot of France. It has

set up a factory at Hirahalli in Tumkur District of

Karnataka State. The appellant company has taken on rent the

premises belonging to the Church of South Indian Trust

Association, respondent No. 1 in these appeals, in Bangalore

on a monthly rent of Rs. 21,159. The appeallant company

committed default in payment of rent and as on March 31,

1987 a sum of Rs. 2,45,534 was payable as rent to the

respondent. The respondents issued a legal notice dated 1st

April, 1987 calling upon the appellant-company to pay the

said amount. The appellant-company while admitting the

liability to pay the aforesaid sum stated that it was

expecting certain sums of money towards developmental loan

from the Government of Karnataka and as soon as the same

was received it would clear the out standing payable by it

to the respondents. Since the amount was not paid the

respondents issued a notice under section 434 of the

Companies Act and thereafter a petition was filed in the

High Court of Karnataka under Section 433(e) of the

Companies Act for winding up of the appellant-company. While

the said winding up petition was pending the appellant-

company, claiming that it has become a sick industrial

company, filed a reference under section 15(1) of the Act

before the Board of Industrial and Financial Reconstruction,

hereinafter referred to as `the Board', on 12 December,

1988. After hearing the concerned parties, the Board formed

a prima facie opinion that it would be just and equitable as

also in public interest that the appellant-company, which

has become a sick industrial company within the meaning of

section 3(1)(o) of the Act, should be wound up in view of

the large accumulated losses, poor market prospects for the

products of the appellant-company and inability of the

promoters to bring in the required additional interest free

funds etc. After publication of the general notice in the

newspapers and on intimation to the concerned parties the

Board heard the objections/suggestions, if any, of the

concerned parties to the proposed winding up of the company

and after considering the same the Board passed the order

dated April 26, 1990, whereby it was found:

"Upon consideration of the facts and material

before us and the submissions made at today's

hearing, we find that Shree Chamundi Mopeds Ltd.

have become economically and commercially non-

viable due to its huge accumulated losses and

liabilities and should be wound up. However, in

view of the submissions made by the company and in

order to give a final opportunity to the promoters

as requested by them, our advice

1007

to wind up the company to the respective High Court

will be with-held for a period of one month. The

promoters were directed to submit an acceptable

rehabilitation proposal which is technically,

economically and commercially viable for the

revival of the company to ICICI urgently and ICICI

was directed to appraise the proposal, if any,

submitted by the promoters to them and submit their

report to us within one month. If no acceptable

rehabilitation scheme is received by the BIFR

within one month, our opinion to wind up the

company will be forwarded to the High Court of

Judicature in Karnataka for further necessary

action under the law.

The appeal filed by the appellant-company before the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 13

Appellate Authority for Industrial and Financial

Reconstruction, hereinafter referred to as the "Appellate

Authority", against the said order dated 26 April 1990,

was dismissed by the Appellate Authority by order dated

January 7, 1991. The appellant-company has filed Writ

petition (Civil) No. 594/91 in the High Court of Delhi

wherein the said order passed by the Appellate Authority

has been challenged. In the said writ petition, the High

Court of Delhi, on February 21, 1991, passed an order for

issuing notice returnable for May 10, 1991, to show-cause as

to why rule nisi be not issued. On the stay petition filed

with the said writ petition, notice was issued for May 10,

1991 and in the meanwhile, operation of the order of the

Appellate Authority dated January 7, 1991 was stayed. We

have been informed that the said Writ Petition is still

pending in the Delhi High Court and the stay order passed by

the said Court is also operative.

After the dismissal of the appeal of the appellant-

company by the Appellate Authority the winding up petition

was taken up for consideration and it was allowed by a

learned single Judge of the Karnataka High Court by order

dated August 14, 1991. The learned single Judge was of the

view that pendency of the writ petition in the High Court of

Delhi and the stay of the order of the Appellate Authority

did not stand in the way of the Court to proceed with the

matter. The appellant-company filed an appeal against the

said order of the learned single Judge which was dismissed

by a Division Bench of the High Court by order dated

November 6, 1991. Civil Appeal No. 126/92 has been filed by

the appellant-company against the said order of the

Karnataka High Court dated November 6, 1991.

1008

On 26 February 1988 the respondents filed a petition seeking

eviction of the appellant-company from the demised premises

under s.21(1) of the Karnataka Rent Control Act, 1961 on the

ground that the appellant-company is a chronic defaulter in

the payment of rent and as on March 31, 1987 the appellant-

company was in arrears to the tune of Rs. 2,45,534 and that

the said amount has not been paid in spite of notice and

that a cheque dated January 1, 1988 for a sum of Rs. 50,000

which was sent by the appellant-company, when presented for

encashment, was dishonored. In those proceedings the

appellant-company moved an application under s.151 CPC read

with s. 22 of the Act for stay of the said proceedings on

the ground that the appellant-company had been declared a

sick industrial company under the Act by the Board and a

scheme was under preparation as per section 16 of the Act.

The said application of the appellant-company was rejected

by the XII Additional Small Causes Judge, Bangalore by order

dated September 14, 1989 on the view that section 22 of the

Act had no application inasmuch as proceedings instituted by

the landlord for recovery of possession of the premises of

which a sick industrial company is a tenant is not included

among the proceedings which are required to be suspended

under s. 22(1) of the Act. Thereafter the XII Additional

Small Causes Judge, Bangalore by order dated September 30,

1989 allowed the eviction petition filed by the respondents

and held that the respondents were entitled to get

possession of the premises and that appellant-company is

liable to vacate and give possession to the respondent. The

appellant company filed a writ petition against to said

order of the Additional Small Causes Court which was

subsequently converted into a revision petition under s. 50

of the Karnataka Rent Control Act. The said revision was

dismissed by a learned single Judge of the Karnataka High

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 13

Court by order dated 15 March, 1991 view of s. 29(1) of the

Karnataka Rent Control Act which prescribes that no tenant

against whom an application for eviction his been made by a

landlord under s. 21 shall be entitled to prefer or

prosecute a revision petition under s. 50 against an order

made by the court on an application made under s. 21 unless

he has paid or pays to the landlord or deposits with the

District Judge or the High Court, as the case may be, all

arrears of rent due in respect of the premises up to the

date of payment. The learned single Judge found that neither

the tenancy nor the amount claimed in the petition towards

the arrears and the subsequent rents due as on February 28,

1991 (amounting in all Rs. 9,35,618) was disputed. The

learned single Judge rejected the prayer for exemption from

1009

the applicability of s. 29(1) of the Karnataka Rent Control

Act claimed on the basis of the statutory protection granted

to the appellant-company under section 22 of Act. It was

held that no enquiry under s. 16 was pending nor any scheme

referred to under s. 17 was under preparation or

consideration and there is also no sanctioned scheme under

implementation and that the appeal filed by the appellant-

company under s. 25 of the Act has also been rejected. It

was held that the stay order which had been passed by the

Delhi High Court in the writ petition did not entitle the

appellant-company to invoke the protection under s. 22 of

the Act as if the appeal under section 25 of the Act was

pending. The revision petition filed by the appellant-

company was, therefore, rejected. Civil Appeal No. 2553/91

has been filed by the appellant-company against the said

order of the Karnataka High Court.

Two questions that arise for consideration in these

appeals are :

(1) What is the effect of the order passed by Delhi

High Court dated February 21, 1991 staying the

operation of the order January 7, 1991 passed by

the Appellate Authority ? Does it mean that after

the passing of the said order by the High Court,

the proceedings under the Act should be treated as

pending and, if so, before which authority ?

(2) Are the proceedings instituted by landlord for

eviction of a tenant who is a sick company from the

premises let out to it, required to be suspended

under Section 22(1) of the Act ?

The first question arises in both the appeals inasmuch

as the order of the learned Single Judge of the High Court

dated August 14, 1991 for winding up of the appellant-

company as well as the order of the Division Bench of the

High Court dated November 6, 1991, which are under challenge

in C.A. No. 126 of 1992, were passed after the passing of

the stay order dated February 21, 1991 by the High Court.

Similarly in C.A. No. 2553 of 1991 the revision petition

filed by the appellant-company against the order of the XII

Additional Small Cause Judge, Bangalore allowing the

Eviction petition was dismissed by the learned Single Judge

of the High Court of March 15, 1991, i.e., after the passing

of the stay order by the Delhi High Court. The second

question arises for consideration only in Civil Appeal No.

2553 of 1991 arising out of the eviction proceedings

instituted by the respondents.

1010

Sub-s. (1) of Section 22 which alone has relevance to

these questions provides as under :

"22 Suspension of legal proceedings, contracts etc.

(1) Where in respect of an industrial company, an

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 13

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 the industrial

company or for execution, distress or like against

any of the properties of the industrial company or

for the appointment of a receiver in respect

thereof shall lie or be proceeded with further,

except with the consent of the Board or, as the

case may be, the Appellate Authority."

A perusal of the aforesaid provision shows that it is

applicable, in respect of an industrial company, where (i)

an inquiry under Section 16 is pending; or (ii) a scheme

referred to in Section 17 is under preparation or

consideration; or (iii) a sanctioned scheme is under

implementation; or (iv) where an appeal under Section 25

relating to the industrial company is pending. In that event

no proceedings for winding up of the industrial company or

for execution, distress or the like against any of the

properties of the industrial company or for appointment of

receiver in respect thereof shall lie or be proceeded with

further. This injunction is, however, subject to the

exception that the proceedings can be instituted or

proceeded further with consent of the Board or the Appellate

Authority. In other words, there is no absolute bar to the

institution of proceedings referred to in s. 22(1) and for

the operation of the bar imposed by the said section it is

necessary that one of the matters referred to therein should

be pending so that directions may be obtained either from

the Board or the Appellate Authority for institution of or

continuation of a proceeding of the type specified in s.

22(1).

In the instant case, the proceedings before the Board

under ss. 15 and 16 of the Act had been terminated by order

of the Board dated April

1011

26, 1990 whereby the Board, upon consideration of the facts

and material before it, found that the appellant-company had

become economically and commercially non-viable due to its

huge accumulated losses and liabilities and should be wound

up. The appeal filed by the appellant-company under s. 25 of

the Act against said order dated January 7, 1991. As a

result of these orders, no proceedings under the Act was

pending either before the Board or before the Appellate

Authority on February 21, 1991 when the Delhi High Court

passed the interim order staying the operation of the

Appellate Authority dated January 7, 1991. The said stay

order of the High Court cannot have the effect of reviving

the proceedings which had been disposed of by the Appellate

Authority by its order dated January 7, 1991. While

considering the effect of an interim order staying the

operation of the order under challenge, a distinction has to

be made between quashing of an order and stay of operation

of an order Quashing of an order results in the restoration

of the position as it stood on the date of the passing of

the order which has been quashed. The stay of operation of

an order does not, however, lead to such a result. It only

means that the order which has been stayed would not be

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 13

operative from the date of the passing of the stay order and

it does not mean that the said order has been wiped out from

existence. This means that if an order passed by the

Appellate Authority is quashed and the matter is remanded,

the result would be that the appeal which had been disposed

of by the said order of the Appellate Authority would be

restored and it can be said to be pending before the

Appellate Authority after the quashing of the order of the

Appellate Authority. The same cannot be said with regard to

an order staying the operation of the order of the Appellate

Authority because in spite of the said order, the order of

the Appellate Authority continues to exist in law so long as

it exists, it cannot be said that the appeal which has been

disposed of by the said order has not been disposed of and

is still pending. We are, therefore, of the opinion that the

passing of the interim order dated February 21, 1991 by the

Delhi High Court staying the operation of the order of the

Appellate Authority dated January 7, 1991 does not have the

effect of reviving the appeal which had been dismissed by

the Appellate Authority by its order dated January 7, 1991

and it cannot be said that after February 21, 1991, the said

appeal stood revived and was pending before the Appellate

Authority. In that view of the matter, it cannot be said

that any proceedings under the Act were pending before the

Board or the Appellate Authority

1012

on the date of the passing of the order dated August 14,

1991 by the learned Single Judge of the Karnataka High Court

for winding up of the company or on November 6, 1991 when

the Division Bench passed the order dismissing O.S.A. No. 16

of 1991 filed by the appellant-company against the order of

the learned Single Judge dated August 14, 1991. Section

22(1) of the Act could not, therefore, be invoked and there

was no impediment in the High Court dealing with the winding

up petition filed by the respondents. This is the only

question that has been canvassed in Civil Appeal No. 126 to

1992, directed against the order for winding up of the

appellant-company. The said appeal, therefore, fails and is

liable to be dismissed.

Similarly in Civil Appeal No. 2553 of 1991 this

question has been raised by the appellant-company to

challenge the order of the learned Single Judge of the

Karnataka High Court dated March 15, 1991 dismissing the

revision petition under s. 50(1) of Karnataka Rent Control

Act. For the reason aforementioned section 22(1) of the Act

cannot be invoked to assail the said order of the High Court

on the ground that on the date of passing of the order of

the high Court the matter was pending before the appellate

Authority. But in this appeal, the order allowing the

eviction petition was passed by the XII Additional Small

Cause Court on September 30, 1989 and at that time the

matter under ss. 15 and 16 was pending before the Board. It

is, therefore, necessary to consider the second question

about the applicability of s. 22(1) to eviction proceedings

instituted by the landlord against the tenant who happens to

be a sick company. In this regard, it may be mentioned that

the following proceedings only are automatically suspended

under s. 22(1) of the Act :

(1) Proceedings for winding up of the industrial

company;

(2) Proceedings for execution, distress or the like

against the properties of the sick industrial company; and

(3) proceedings for the appointment of receiver.

Eviction proceedings initiated by a landlord against a

tenant company would not fall in categories (1) and (3)

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 13

referred to above. The question is whether they fall in

category (2). It has been urged by the learned counsel for

the appellant-company that such proceedings fall in category

(2) since they are proceedings against the property of the

sick

1013

industrial company. The submission is that the leasehold

right of the appellant-company in the premises leased out to

it is property and since the eviction proceeding would

result in the appellant-company being deprived of the said

property, the said proceedings would be covered by category

(2). We are unable to agree. The second category

contemplates proceedings for execution, distress or the like

against any other properties of the industrial company. The

words `or the like' have to be construed with reference to

the proceedings words, namely, `for execution, distress'

which means that the proceedings which are contemplated in

this category are proceedings whereby recovery of dues is

sought to be made by way of execution, distress or similar

process against the property of the company. proceedings for

eviction instituted by a landlord against a tenant who

happens to be a sick industrial company, cannot, in our

opinion, be regarded as falling in this category. We may, in

this context, point out that, as indicated in the Preamble,

the Act has been enacted to make special provisions with a

view to securing the timely detection of sick and

potentially sick companies owing industrial undertakings,

the speedy determination by a Board of experts of the

preventive, ameliorative, remedial and other measures which

need to be taken with respect to such companies and the

expeditious enforcement of the measures so determined. The

provision regarding suspension of legal proceedings

contained in Section 22(1) seeks to advance the object of

the Act by ensuring that a proceeding having an effect on

the working or the finances of a sick industrial company

shall not be instituted or continued during the period to

matter is under consideration before the Board or the

Appellate Authority or a sanctioned scheme is under

implementation without the consent of the Board or the

Appellate Authority. It could not be the intention of

Parliament in enacting the said provision to aggravate the

financial difficulties of a sick industrial company while

the said matters were pending before the Board of the

Appellate Authority by enabling a sick industrial company to

continue to incur further liabilities during this period.

This would be the consequence if sub-section (1) of s. 22 is

construed to bring about suspension of proceedings for

eviction instituted by landlord against a sick industrial

company which has ceased to enjoy the protection of the

relevant rent law on account of default in payment of rent.

It would also mean that the landlord of such a company must

continue to suffer a loss by permitting the tenant (sick

industrial company) to occupy the premises even though it is

not in a position to pay the rent. Such an intention cannot

be imputed

1014

to Parliament. We are, therefore, of the view that Section

22(1) does not cover a proceeding instituted by a landlord

of a sick industrial company for the eviction of the company

premises let out to it.

We are also unable to agree with the contention of the

learned counsel for the appellant-company that the leasehold

interest of the appellant-company in premises leased out to

it is property for the purpose of Section (22)(1). It is no

doubt true that leasehold interest of the lessee in the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 13

premises leased out to him is property which can be

transferred and the said interest can also be attached and

sold by way of execution in satisfaction of a decree against

a lessee. In that sense, it can be said that the leasehold

interest of a company is its property. But the question is

whether the same is true in respect of the interest of a

company which is in occupation of the premises as a

statutory tenant by virtue of the protection conferred by

the relevant rent law because in the instant case on the

date of reference to the Board the proceedings for eviction

of the appellant-company were pending and the appellant-

company was in occupation of the premises only as a

statutory tenant governed by the provisions of the Karnataka

Rent Control Act. In Smt. Gian Devi Anand v. Jeevan Kumar &

Ors., [1985] Supp. 1 SCR 1, this Court has laid down that

the termination of a contractual tenancy does not bring

about a change in the status and legal position of the

tenant unless there are contrary provision in the relevant

Rent Act and the tenant, notwithstanding the termination of

tenancy, does enjoy an estate or interest in the tenanted

premises. It is further laid down that this interest or

estate which the tenant continues to enjoy despite

termination of the contractual tenancy creates a heritable

interest in the absence of any provision to the contrary.

This Court has also held that the legislature which by the

Rent Act seeks to confer the benefit on the tenants and to

afford protection against eviction, is perfectly competent

to make appropriate provision regulating the nature of

protection and the manner and extent of enjoyment of such

tenancy rights after the termination of contractual tenancy

of the tenant including the rights after the termination of

contractual tenancy of the tenant including the rights and

the nature of protection of the heirs on the death of the

tenant.

In the instant case, we are concerned with the right of

the tenant as governed by the Karnataka Rent Control Act. In

clause (r) of Section 3, the expression "tenant" has been

defined to include "the surviving spouse or any son or

daughter or father or mother of a deceased tenant who had

been living with the tenant in the premises as a member of

the tenant's

1015

family after the death of the tenant and a person continuing

in possession after the termination of the tenancy in his

favour". In view of clause (f) of the proviso to sub-section

(1) of section 21 protection against eviction is not

available to a tenant who has "unlawfully sub-let the whole

or part of the premises or assigned or transferred in any

other manner his interest therein and where the sub-letting,

assignment or transfer has been made before the coming into

operation of this part (except in respect of sub-letting,

assignment or transfer to which the provisions of section 61

are applicable), such sub-letting, assignment or transfer

has been made contrary to any provision of law then in

force". Section 23 prohibits sub-letting or transfer by the

tenant and provides as under :

"(1) Notwithstanding anything contained in any law,

but subject to any contract to the contrary, it

shall not be lawful after the coming into operation

of this Part, for any tenant to sub-let whole or

any part of the premises let to him or to assign or

transfer in any other manner his interest therein :

Provided that the State Government may, by

notification, permit in any area the transfer of

interest in premises held under such leases or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 13

class of leases and to such extent as may be

specified in the notification :

Provided further that nothing in this section shall

apply to a tenant having a right to enjoy any

premises in perpetuity.

(2) Any person who contravenes the provisions of

sub-section (1), shall, on conviction, be punished

with fine which may extend to one hundred rupees."

From these provisions, it would appear that except in

cases covered by the two provisos to sub-section (1) of s.

23, there is a prohibition for a tenant to sub-let whole or

any part of the premises let to him or to assign or transfer

in any other manner his interest therein. This prohibition

is, however, subject to a contract to the contrary. A tenant

who sublets or assigns or transfer the premises in

contravention of this prohibition loses the protection of

law and can be evicted by the landlord under Section

21(1)(f). In the case of a statutory tenant, the

relationship is not governed by contract. The prohibition

against assignment and transfer is, therefore, absolute and

the interest of a statutory tenant can neither be assigned

nor

1016

transferred. This means that the interest of the statutory

tenant in the premises in his occupation, as governed by the

Karnataka Rent Control Act is a limited interest which

enables the surviving spouse or any son or daughter or

father or mother of a deceased tenant who had been living

with the tenant in the premises as a member of the tenant's

family up to the death of the tenant and a person continuing

in possession after the termination of the tenancy in his

favour, to inherit the interest of the tenant on his death.

The said interest of the tenant is, however, not assignable

or transferable and, therefore, the interest of a company

which is continuing in occupation of the premises as a

statutory tenant by virtue of the protection conferred by

the Karnataka Rent Control Act, cannot be regarded as

property of the company for the purpose of sub-section (1)

of s. 22 of the Act and for that reason also the provisions

of Section 22(1) were not attracted to the eviction

proceedings instituted by the respondents against the

appellant-company. The provisions of Section 22(1) did not,

therefore, bar the prosecution of the said proceedings by

the respondents and the order dated September 30, 1989

passed by the XII Additional Small Cause Judge, Bangalore

allowing the eviction petition cannot be held to have been

passed in contravention of the provisions of Section 22(1)

of the Act. Civil Appeal No. 2553 of 1991 also, therefore,

fails and is liable to be dismissed.

In the result, both the appeals are dismissed but in

the circumstances with no order as to costs.

V.P.R. Appeals dismissed.

1017