REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3603 OF 2009 (Arising out of SLP (C) No.15301 of 2008)

M.D., Bhoruka Textiles Limited … Appellant

Versus

M/s. Kashmiri Rice Industries … Respondent

J U D G M E N T

S.B. Sinha, J.

1. Leave granted.

2. This appeal is directed against a judgment and order dated 29.1.2008  

passed by the High Court of Karnataka at Bangalore in RFA No.982 of 2007  

whereby and whereunder judgment and decree dated 21.12.2006 passed by  

the  Civil  Judge,  Senior  Division,  decreeing the  suit  being OS No.728 of  

2002 filed by the respondent was affirmed.

3. A partnership firm known as M/s.  Kashmiri  Rice Industries has its  

place of business at Hangal.  The said firm entered into a contract for supply  

of paddy husk with the appellant.  Inter alia, on the premise that appellant  

herein, despite supply of the agreed quantity of paddy husk, failed and/or  

neglected to pay the price therefor, the respondent filed a suit for recovery of  

a sum of Rs.2,61,696/- in the Court of Civil Judge, Hangal.

One of the contentions raised by the appellant in the said suit was that  

as the appellant-company has become a sick industry within the meaning of  

the  provisions  of  Section  22  of  the  Sick  Industrial  Companies  (Special  

Provisions)  Act,  1985 (for  short,  ‘the  Act’)  and a  reference  having been  

made  to  the  Board  of  Industrial  and Financial  Reconstruction  (BIFR)  in  

terms of the provisions of the Act, the suit was not maintainable.

The learned Trial Judge, inter alia, framed the following issue :

“Do  defendants  prove  that  suit  is  also  hit  by  Section  22  of  Industrial  Companies  (Special  Provisions)  Act  as  contended  in  Para  7  of  W.S.  Preliminary issue?”

From a  perusal  of  the  judgment,  it  appears  that  no  argument  was  

advanced before the learned Trial Judge on the said issue.  However, it was  

opined that Section 22 of the Act provides for suspension of the proceedings  

2

and in view of the fact  that no final  order has been passed by the BIFR  

declaring the appellant as a sick industry, mere reference would not suffice.  

A finding of fact furthermore was arrived at that the transaction in question  

being subsequent  to the reference,  Section 22 of  the Act  would have no  

application.

4. An  appeal  preferred  thereagainst  has  been  dismissed  by  the  High  

Court by reason of the impugned order.  The High Court, although noticed  

issue No.3, did not record any positive finding thereupon.

5. Mr. R.S. Hegde, learned counsel appearing on behalf of the appellant,  

would urge that the learned Trial Judge as also the High Court committed a  

serious error insofar as they entered into a wrong finding of fact that the  

transaction in question is subsequent to the reference.  It was furthermore  

contended  that  a  plain  reading  of  Section  22  of  the  Act  would  clearly  

establish that the jurisdiction of the Civil Court is ousted thereby.   

6. Mr. Kashi Vishweshwar, learned counsel appearing on behalf of the  

respondent, however, would support the impugned judgment.

7. Before adverting to the rival contentions of the parties, we may notice  

the following admitted facts.

3

Supply  of  husk  during  the  period  17.9.2001  and  28.11.2001,  the  

agreement wherefor was entered into on or about 6.9.2001.  Reference to  

BIFR in terms of Section 16 of the Act was made on 27.12.2001.  The said  

reference was registered by the BIFR on 20.03.2002.  Respondent filed the  

suit  on  17.12.2002.   The  learned  Trial  Judge,  therefore,  committed  a  

manifest error in opining that the transaction in question was subsequent to  

the reference.  It is also apparent from the record that respondent was aware  

of the fact that the appellant had made reference to the BIFR in terms of the  

provisions Act.

8. The Act was enacted to make, in the public interest, special provisions  

with a view to securing the timely detection of  sick and potentially  sick  

companies owning 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  and  for  matters  

connected therewith or incidental thereto.

Indisputably, thus, appellant is an industrial undertaking.  Chapter III  

of the Act provides for reference, enquiries and schemes.  Section 15 of the  

Act  provides  for  reference  to  the  Board  in  terms  whereof  the  Board  of  

4

Directors of the Company is required to make a reference within 60 days  

from the date of the duly audited accounts of the company for the financial  

year  as  at  the  end  of  which  the  Company  has  become a  sick  industrial  

company.  Such reference is made for determination of the measures which  

may be adopted with respect to the company.  The proviso appended thereto,  

however, entitles the Board of Directors to make a reference within 60 days  

from the date of formation of the opinion that the Company had become a  

sick industrial company before the audited accounts of the financial year in  

question are finalized.

Section 16 of the Act empowers the Board to make such enquiry as it  

may deem fit for determining whether any Industrial Company has become a  

sick industrial company, inter alia, upon receipt of a reference with respect  

to such company under Section 15.   

Sub-section (1) of Section 22 of the Act reads as under :

“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  

5

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  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.”

A plain reading of the aforementioned provision would clearly go to  

show that a suit is barred when an enquiry under Section 16 is pending.  It is  

also not in dispute that prior to institution of the suit, respondent did not  

obtain consent of the Board.

9. The  provisions  of  the  Act  and,  in  particular,  Chapter  III  thereof,  

provides for a complete code.  The Board has a wide power in terms of the  

provisions of the Act, although it is not a Court.  Sub-section (4) of Section  

20  as  also  Section  32  of  the  Act  provides  for  non-obstante  clauses.   It  

envisages  speedy  disposal  of  the  enquiry  and preferably  within  the  time  

framed provided for thereafter.   Section 17 empowers the Court to make  

6

suitable orders on the completion of enquiry.  Preparation and sanction of  

the scheme is also contemplated under the Act.   

10. Section 22 of the Act must be interpreted giving a plain meaning to its  

contents.   An enquiry in terms of Section 16 of the Act by the Board is  

permissible upon receipt of a reference.  Thus, reference having been made  

on 27.12.2001 and the suit having been filed on 17.12.2002, the receipt of a  

reference  must  be held to  be  the  starting period for  proceeding with  the  

enquiry.  The effect of the provisions of the Act has been considered by a  

Three  Judge  Bench  decision  of  this  Court  in  Tata  Motors  Ltd. v.  

Pharmaceutical Products of India Ltd. & Anr. [(2008) 7 SCC 619], wherein  

it,  in  no  uncertain  terms,  held  that  SICA  is  a  special  statute  and,  thus,  

overrides other acts like Companies Act, 1956, stating :

“31. 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.

32. 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.

7

33. The jurisdiction  of  the  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.”

If the civil court’s jurisdiction was ousted in terms of the provisions of  

Section 22 of the Act, any judgment rendered by it would be  coram non  

judis.  It is a well settled principle of law that a judgment and decree passed  

by a court or tribunal lacking inherent jurisdiction would be a nullity.  In  

Kiran Singh & Ors. v.  Chaman Paswan & Ors. [(AIR 1954 SC 340], this  

Court held :

“… It is a fundamental principle well-established  that a decree passed by a Court without jurisdiction  is  a  nullity  & that  its  invalidity  could be set  up  whenever and wherever it is sought to be enforced  or relied upon, even at the stage of execution and  even  in  collateral  proceedings.   A  defect  of  jurisdiction,  whether it  is pecuniary or territorial,  or whether it is in respect of the subject-matter of  the action, strikes at the very authority of the Court  to  pass  any decree,  and such a defect  cannot  be  cured even by consent of parties.”

[See also  Chief Engineer, Hydel Project v.  Ravinder Nath [(2008) 2  SCC 350]

In Mantoo Sarkar v. Oriental Insurance Company Ltd. & Ors. [(2009)  

2  SCC 244],  we must  place on record,  that  a distinction has been made  

8

between a jurisdiction with regard to the subject matter of the suit and that of  

the territorial and pecuniary jurisdiction.  It was laid down that a case falling  

within the former category would make a judgment a nullity.

11. For the reasons aforementioned,  the  impugned judgment cannot  be  

sustained.  It is set aside accordingly.  The appeal is allowed accordingly.   

12. However,  it  appears  that  the  appellant  has  deposited  50%  of  the  

decretal amount.  The Civil Court shall transfer the said amount to BIFR.  

The  BIFR,  if  has  not  finalized  any  scheme  so  far,  would  do  so  as  

expeditiously as possible.  The BIFR shall also take into consideration the  

decree passed by the learned Trial Judge in favour of the plaintiff.  In the  

facts and circumstances of the case, there shall be no order as to costs.

……………………………….J. [S.B. Sinha]

..…………………………..…J.     [Dr. Mukundakam Sharma]

New Delhi; May 15, 2009

9