Saurashtra Cement Limited v. National Aviation Co. of India Ltd. & Ors.

Judgment

1. Heard Mr. Amol Doijode, learned counsel for the Petitioner and Ms. Ranjana Parikh, learned counsel for the Respondent No.1 at length.

2. By this petition under Articles 226 and 227 of the Constitution of India, the petitioner has challenged the Judgment and Order dated 23 rd August 2010 passed by the learned Judge, Bombay City Civil Court, greater Mumbai (for short “Appellate Officer”) in Misc. Appeal No.192 of 2008. By that order, the learned Appellate Officer partly allowed the Appeal preferred by the petitioner herein and modified the order dated 26th August 2008 passed by the learned Estate Officer and directed the petitioner herein to pay damages at the rate of Rs.200 per sq.ft. per month for the premises admeasuring 1971.28 sq.ft. situate at 20 th floor of Air India Building, Nariman Point, Mumbai 400 021 (for short “suit premises”) from 1st April 1995 to 31st October 2003 with interest thereon at the rate of 12 % per annum from 1/4/1995 till realisation. The learned Appellate Officer also gave liberty to the petitioner herein to apply to the Board of Industrial and Financial Reconstruction (for short “BIFR”) for suitable orders under Section 22(3) of the Sick Industrial Companies 902-wp-8312-2010 (Special Provisions) Act, 1985 (for short “SICA”). By the Judgment and order dated 26th August 2008, the learned Estate Officer directed the petitioner herein to pay damages at the rate of Rs.300 per sq.ft. per month from 1/4/1995 till its final payment on the sum of Rs.5,86,28,331.30. (Rupees five crores eighty six lakhs twenty eight thousand three hundred thirty one and paise thirty only). The relevant and material facts that are necessary for the disposal of the present petition, briefly stated, are as under.

3. The petitioner was a tenant of the suit premises and the Respondent no.1 is the landlord. The Estate Officer passed an order on 19th November 2001 in Eviction Proceedings under Section 4 of the the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 (for short 'Act') declaring the petitioner as an unauthorized occupant and directed it to hand over possession to the respondent no.1 The petitioner

challenged the said order by filing Misc. Appeal No.296 of 2001 before the Appellate Officer. During the pendency of that appeal, the petitioner handed over possession on 11th June 2007 to the respondent no.1. It is the case of the petitioner that it handed over possession with an understanding that the damages proceedings would be withdrawn. After handing over possession, the Misc. Appeal was withdrawn on 21st July

4. In the mean time, the respondent no.1 filed an application before the Estate Officer for damages. On 21st November 2003 show cause notice was issued by the Estate Officer in Damage Case No.12 of 2003 calling upon the petitioner to show cause as to why an order requiring the petitioner to pay damages on account of unauthorized use and occupation be not passed against it. The petitioner made application on 18 th December 2003 praying for stay of the proceedings on the ground that it is being declared to be a relief undertaking. The Estate Officer, however, 902-wp-8312-2010 did not stay the proceedings and by letter dated 4th May 2006 informed the petitioner that the said case is fixed for hearing on 16th May 2006.

5. On 16th May 2006 the petitioner filed an application for stay of the proceedings in terms of Section 22 of the SICA as the petitioner – company was registered with the BIFR. The 1st Respondent resisted the application by filing its reply on 30th May 2006. The matter was thereafter adjourned from time to time and ultimately by order dated 9 th April 2009, the Estate Officer held that the proceedings under Section 7 of the Act are not akin to the proceedings for recovery of money and, therefore, the proceedings are not required to be stayed under Section 22(1) of the SICA. The learned Estate Officer accordingly rejected the application dated 16th May 2006 made by the petitioner.

6. The matter thereafter proceeded further before the Estate Officer and Respondent no.1 examined (i) Shri S.K. Chhaya; (ii) Shri Vikamsay, the Valuation Expert and (iii) Shri N.S. Nagarkatte. The petitioner however, did not lead any evidence.

7. After considering the material on record as also after hearing the arguments of both sides, the Estate Officer passed order on 26th August

2008. As noted earlier, the Estate Officer directed the petitioner to pay damages at the rate of Rs.300/- per sq.ft. per month from 1/4/1995 till 31st October 2003. The Estate Officer directed the petitioner to pay a sum of Rs.5,86,28,331/- with simple interest at the rate of 12 per cent per annum aggregating to Rs.6,09,73,464=55 as damages for the unauthorized occupation of the suit premises for the period from 1 st April 1995 to 31st October 2003.

8. Being aggrieved by this order, the petitioner preferred Misc. Appeal under Section 9 of the Act before the Appellate Officer. By the impugned judgment and order dated 23rd August 2010 the Appellate 902-wp-8312-2010 Officer modified the order of the Estate Officer and directed the petitioner to pay damages at the rate of Rs.200/- per sq.ft. per month from 1/4/1995 to 31st October 2003 with interest thereon at the rate of 12 per cent per annum from 1/4/1995. Aggrieved by this decision the petitioner has instituted the present petition under Articles 226 and 227 of the Constitution of India.

9. In support of this petition Mr.Doijode strenuously contended that the authorities below committed serious error in going on with the proceedings under Section 7 of the Act. He submitted that the learned Estate Officer committed serious error in rejecting the application dated 16th May 2006 made by the petitioner under Section 22 of the SICA. He submitted that the petitioner company was being declared to be a relief undertaking and ultimately the petitioner company was registered with the BIFR. Once the petitioner company was registered with the BIFR, in terms of Section 22 of the SICA, the authorities were bound to stay all the proceedings. The Estate Officer came to erroneous conclusion that the proceedings under Section 7 are not akin to the proceedings for recovery of money. The learned Appellate Officer also committed the same error as that of the Estate Officer in holding that the proceedings under Section 7 of the Act need not be stayed. In support of this proposition, he relied upon the following judgments: (i) Gram Panchayat Vs. Shree Vallabh Glass Works Ltd., AIR 1990 SC 1017; and (ii) Maharashtra Tubes Ltd. Vs.S.I.I. Corporation of Maharashtra Ltd., (1993) 2 SCC 144.

10. In any case, Mr.Doijode submitted that the first respondent's claim for damages is barred by limitation since it is for a period from 1/4/1995 i.e. exceeding three years preceding the date of filing the damages case. He submitted that the respondent no.1 filed the proceedings under Section 7 of the Act in the year 2003. At the highest the respondent no.1 would be entitled to claim damages for the period from 2000 till 2003. In 902-wp-8312-2010 other words he submitted that the claim for damages from 1st April 1995 till 31st December 1999 is barred by limitation. In support of this proposition he relied upon the following judgments: (i) (ii) New Delhi Municipality Vs. Kalu Ram, AIR 1976 SC1637; Commissioner of Customs and Central Excise Vs. Hongo India (P) Ltd., (2009) 5 SCC 791.

11. On the other hand, Ms. Parikh supported the impugned orders. She submitted that under Section 22(1) of the SICA 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 the appointment of a receiver in respect thereof would lie or can be proceeded with further, except with the consent of the Board or as the case may be, the Appellate Authority. She submitted that proceedings under Section 7 of the Act cannot be equated with (i) the proceedings for winding up of industrial company; (ii) the execution proceedings and (iii) the distress or like proceedings. She invited my attention to the judgment of the Apex Court in the case of Maharashtra Tubes Ltd. (supra) and Section 29 of the State Financial Corporations Act, 1951 which provides that where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any installment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concern, as well as right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. In other words, she submitted that on a plain reading of Section 29, it permits coercive action against the defaulting industrial concern or the establishment which would be taken in execution or 902-wp-8312-2010 distress proceedings. She, therefore, distinguished the judgment of the Apex court in the case of Maharashtra Tubes Ltd. (supra) and submitted that proceedings under Section 7 of the Act is not a coercive action against the petitioner. In so far as the judgment of the Apex court in Gram Panchayat (supra) is concerned, in that case also Gram Panchayat had initiated coercive proceedings under Section 129 of the Bombay Village Panchayats Act, 1958 for recovery of a sum of Rs.9,47,539/- towards the property tax and other amounts due from the respondent – company. It is in that context the Apex Court suspended the proceedings under Section 129. She, therefore, submitted that the judgment of the Apex Court in the case of Gram Panchayat (supra) is not applicable to the facts of the present case.

12. In so far as ground of limitation is concerned, she submitted that the judgment of the Apex Court in the case of Kalu Ram (supra) is not applicable. In that case the Apex Court was considering the recovery of arrears of rent. In the present case the respondent no.1 is claiming damages from the petitioner. Unless and until the status of the petitioner is determined as an unauthorized occupant, the respondent no.1 cannot lay its claim for damages. In other words, she submitted that first and foremost the status of the petitioner has to be determined. It is only after the determination of the status of the petitioner as an unauthorized occupant, the right to sue accrues to the first respondent. She further submitted that in any case the provisions of the Limitation Act, 1963 are not applicable to the proceedings initiated under the Act. In support of this proposition she relied upon the judgment of the Apex Court in the case of Sakuru Vs. Tanaji, AIR 1985 SC 1279.

13. I have considered the rival submissions made by the learned counsel appearing for the parties. I have also perused the material on record. As noted earlier, the petitioner has raised only two contentions 902-wp-8312-2010 viz. (i) whether in view of Section 22 of the SICA, the authorities below were justified in proceeding with the matter and (ii) whether the authorities below were justified in awarding damages from 1/4/1995 or whether the damages should have been awarded from the year 2000. Mr. Doijode rightly did not dispute the fixation of the damages by the learned Appellate Officer at the rate of Rs.200/- per sq. ft. per month. Even otherwise the authorities below have recorded the concurrent findings based on the evidence of the three witnesses examined by the respondent no.1. As against this the petitioner did not lead any evidence. In view thereof, one has to proceed on the footing that the petitioner has not disputed the fixation of damages at the rate of Rs.200/- per sq. ft. per month.

14. The petitioner has relied upon the judgment of the Apex court in the case of Maharashtra Tubes Ltd. (supra). In that case the appellant - company before the Apex court commenced its activities of manufacturing steel pipes, tubes of various sizes and dimensions for export some time in July 1982. The appellant ran into difficulties on account of various factors which necessitated the cessation of manufacturing activities by about July 1986. The disputes were raised by the workmen of the company. Since the appellant had run into serious financial problems on account of accumulated losses and paucity of cash flow, it wrote a letter to the BIFR on 28th August 1988 enclosing therewith the provisional Balance sheet for the year ended 30th June 1988 showing the accumulated losses and sought financial assistance for revival of the unit. The correspondence was exchanged between the appellant and BIFR. Eventually on 20th July 1992 the BIFR Bench dismissed the reference as not maintainable and came to the conclusion that the appellant company could not be held a sick industrial company under Section 3(1)(o) of the SICA. After the order of the BIFR, the first respondent initiated proceedings under Section 29 of the State Financial 902-wp-8312-2010 Corporations Act, 1951 for taking over possession of the factory premises of the appellant company. In the mean time on 20th August 1992 the company filed an appeal under Section 25 of the SICA against the order of the BIFR dated 20th July 1992 and on the same day the appellant intimated the first respondent to stay its hands in view of Section 22 of the SICA. Thereupon the first respondent addressed a letter to the Appellate Authority for permission to take possession of the assets of the company. The appellant company challenged the said action before this Court by filing a writ petition which came to be dismissed on 6th October

1992. The High Court dismissed the writ petition relying upon the judgment of the Apex Court in the case of Gram Panchayat (supra). The order dated 06.10.1997 was challenged before the Apex Court. The Apex Court considered the scheme of the SICA as also State Financial Corporations Act, 1951. In paragraph 10 of the report, it was observed that the words “or the like”, which follow the words “execution” and “distress” of Section 22 of SICA are clearly intended to convey that the properties of the sick industrial company shall not be made the subject matter of coercive action of similar quality and characteristic till the BIFR finally disposes of the reference made under Section 15 of the SICA. It was further observed that the action contemplated by Section 29 of the State Financial Corporations Act, 1951 is undoubtedly a coercive measure directed at the taking over of the management and the property of the industrial concern and confers further right on the Financial Corporation to transfer by way of lease or sale the properties of the said concern. The Apex court, therefore, held that Section 29 of the State Financial Corporations Act, 1951 permits coercive action against the defaulting industrial concern of the type which would be taken in execution or distress proceedings.

15. In the present case the authorities below have assessed the damages for the period from 1/4/1995 till 31st October 2003. In other 902-wp-8312-2010 words, the authorities below have made a quantification of the damages. After the quantification of the damages, if any person refuses to pay the damages payable under sub-section (2) of Section 7 or the interest determined under sub-section (2A) of that Section within the time specified therefor in the order relating thereto, under Section 14 of the Act, the Estate Officer has to issue certificate for the amount due to the Collector who has to proceed to recover the same as an arrear of land revenue. In other words the quantification of the damages would not be covered by Section 14 of the Act. It is only after the damages are quantified, the respondent no.1 can invoke Section 14 by approaching the Estate Officer for issuing a certificate for the amount due to the Collector who shall proceed to recover the same as an arrear of land revenue. It is at this stage in my opinion, Section 22 of the SICA will be attracted and not at the time of quantification of the damages. In other words, before the Collector proceeds to recover the amount specified in the certificate so issued as an arrears of land revenue, the respondent No.1 will have to obtain the consent of the BIFR or, as the case may be, of the Appellate Authority as per Section 22 of SICA. The Appellate Officer has permitted the petitioner if it so desires to apply to BIFR for suitable orders under Section 22(3) of SICA. In the light of the aforesaid discussion, I am of the opinion that the Judgments of the Apex Court in the cases of (i) Gram Panchayat (supra) and (ii) Maharashtra Tubes Ltd. (supra) do not advance the case of the petitioner. The proceedings under Section 7 of the Act cannot be equated with (i) the winding up proceedings; (ii) the execution proceedings (3) the distress proceedings or the like. I, therefore, do not find that the authorities below committed any error in dismissing the application for stay filed by the petitioner. In any case, as noted earlier, the Estate Officer dismissed the application for stay on 9th April 2007. The petitioner did not challenge the said order by filing an appeal under Section 9 or by filing a writ petition in this Court. Rather the petitioner participated in the proceedings, which were ultimately over. 902-wp-8312-2010

16. The petitioner further contended that at any rate the claim made by the respondent no.1 for damages from 1/4/1995 is barred by limitation. Mr. Doijode relied upon Article 113 of the Limitation Act, 1963. He contended that Article 113 provides for filing of proceedings within three years from the date when the right to sue accrues. In the instant case the respondent no.1 filed application in the year 2003 and, therefore, at the highest the authorities could have awarded damages from the year 2000 onwards. In other words, he submitted that the authorities below committed serious error in awarding the damages from 1/4/1995 till 31 st December 1999. In support of this proposition he relied upon the judgments of the Apex Court in the case of Kalu Ram (supra) and Commissioner of Customs and Central Excise (supra).

17. On the other hand, Ms. Parikh relied upon the judgment of the Apex Court in the case of Sakuru (supra) to contend that Limitation Act is not applicable to the proceedings under the Act. In the case of Kalu Ram (supra), the question that was posed before the Apex Court was about recovery of rent in respect of the public premises in terms of Section 7(1) of the Act. In that context the Apex Court held that the word “payable” in Section 7 in the context in which it occurs means “legally recoverable”. If the recovery of any amount is barred by the Law of Limitation, the Estate Officer could not still insist that said amount was payable. In the present case the respondent No.1 is not claiming arrears of rent in terms of Section 7(1). On the other hand, the respondent no.1 is claiming damages in terms of Section 7(2) of the Act. In my opinion, respondent no.1 can claim damages only upon determination of the status of the petitioner as an unauthorized occupant. As noted earlier, in the present case the notice was issued to the petitioner on 10/14 February 1995 terminating tenancy with effect from 31st March 1995. The proceedings under Section 4(1) and (2)(b)(ii) of the Act were initiated in Eviction Case No.15 of 1999. Initially the order was passed directing the 902-wp-8312-2010 petitioner to hand over the possession. The petitioner challenged the order before the Appellate Officer in Appeal No.196 of 2001. During the pendency of the appeal, the petitioner however handed over the possession on 11th June 2007 and later on withdrew the appeal on 21 st July 2007. Having regard to the definition of the expression “unauthorized occupation” in Section 2(g) of the Act, the occupation of the petitioner in the public premises became unauthorized on and from 1 st April 1995. Though the appeal was preferred by the petitioner, the same was withdrawn on 21st July 2007. Section 10 of the Act provides that every order made by an Estate Officer or Appellate Officer under the Act shall be final. The order of the Estate Officer was subject to decision of the Appellate Officer and the said order attained finality upon withdrawal of the appeal on 21st July 2007. In the mean time, the respondent no.1 had filed proceedings under Section 7(2) of the Act in the year 2003. It is in these circumstances, the damages are claimed from the petitioner from 1st April 1995 to 31st October 2003. I am, therefore, clearly of the opinion that in the first place, the Limitation Act is not applicable. Secondly, even accepting that Article 113 is applicable in the facts of the present case, the right to sue accrued to the first respondent on 21 st July 2007 when the appeal was withdrawn by the petitioner. As noted earlier, the notice terminating the petitioner's tenancy was issued on 10/14 February 1995 terminating the tenancy of the petitioner with effect from 31st March

1995. The petitioner was, therefore, in unauthorized occupation of the suit premises with effect from 1st April 1995 and the said status attained finality only on 21st July 2007 when the appeal was withdrawn.

18. Mr. Doijode invited my attention to the order dated 6 th August 2011 passed by the Appellate Officer in Misc. Appeal No.152 of 2008, Hindalco Industries Limited Vs. Air India Limited and another. He submitted that in that case the claim for recovery of damages for a period of three years preceding the date of initiation of the proceedings was held 902-wp-8312-2010 to be within limitation. The claim for recovery of damages / mesne profits beyond period of three years preceding the date of the proceeding was held not to be within the limitation. For the reasons indicated earlier, I do not find any merit in this submission.

19. In view thereof, I do not find that the authorities below committed any error in passing the impugned orders. As noted earlier, the petitioner has not challenged fixation of the rate of Rs.200/- per sq. ft. per month. In the result, petition fails and the same is dismissed. (R. G. KETKAR, J.) Sanjay Kulkarni