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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.

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    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

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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

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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

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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

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                                                      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

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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

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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

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        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

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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)

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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

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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

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        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