M/S. Steel Complex Limited v. K.G. Subramania Iyer

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE P.SOMARAJAN** **TUESDAY, THE 18TH DAY OF JUNE 2019 / 28TH JYAISHTA, 1941** **RSA.No.652 of 2004** **AGAINST THE JUDGMENT AND DECREE DATED 23-10-2002 IN AS 151/2001 of III ADDITIONAL SUB COURT, KOZHIKODE** **AGAINST THE JUDGMENT AND DECREE DATED 19-10-2000 IN OS 150/1997 of ADDITIONAL MUNSIFF COURT, KOZHIKODE-II** ## **APPELLANT/APPELLANT/DEFENDANT:** **M/S.STEEL COMPLEX LIMITED, WISCO MANOR, P.B.NO.42, FEROKE, CALICUT, REPRESENTED BY THE MANAGING DIRECTOR.** **BY ADVS. SRI.M.PATHROSE MATTHAI (SR.) SRI.G.UNNIKRISHNAN SRI.SAJI VARGHESE SMT.MARIAM MATHAI** ## **RESPONDENT/RESPONDENT/PLAINTIFF:** **K.G.SUBRAMANIA IYER, AGED 62 YEARS, SON OF LATE K.S.GANGADHARA IYER,RESIDING AT `NIDHI', 19/892, CHALAPPURAM P.O., CALICUT-673 002.** **BY ADVS. SRI.P.A.HARISH SRI.V.V.SURENDRAN** **THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD ON 18.06.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **RSA.No.652 of 2004** **2** ## **C.R** ## **JUDGMENT** The defendant came up with this appeal, against decree and judgment of the Trial Court and the First Appellate Court granting a decree for recovery of an amount of Rs.93,624/- being the salary arrears commencing from July,1993 to February 1994 due to the plaintiff. 2. The dispute is with respect to the application of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short SICA, 1985) and the bar of jurisdiction in dealing with the matter by a Civil Court. 3. Admittedly the suit was brought up for recovery of arrears of salary. There is concurrent finding by both the courts below regarding the amount due by way of salary and no sufficient reason brought to the notice of this court to interfere with the said finding on fact. 4. Ext.B5 is the scheme constituted under **RSA.No.652 of 2004** **3** Section 17 of the SICA,1985, by which the bar under Section 22 came into effect as on the date of suit. It was submitted by the respondent that the company was revived during the pendency of second appeal and thereby the company was brought out of the scheme under Section 17 and the bar under Section 22 of the SICA, 1985. Hence the decree of both the Trial Court and the First Appellate Court are valid and the bar under Section 22 would not come into play, it was argued. The subsequent development admitted by both the counsel that the company was revived during the pendency of this appeal and that at present the bar under Section 22 of SICA,1985 not available. But it is also submitted by the learned counsel Sri.G.Unnikrishnan that since there was application of Section 22 of SICA,1985 as on the date of suit and on the date of decree of both the trial court and the First appellate court, the same can only be regarded as nullity in the eye of law and not capable of acquiring any legal sanctity based on a subsequent development. It was also **RSA.No.652 of 2004** **4** submitted that when the decree found to be a nullity, it will not have any legal effect and not capable of revival,though the bar under Section 22 of SICA, 1985 subsequently ceased to have effect on the subject matter. Inorder resolve the issue it is necessary to consider the following questions:- (i)Whether the bar under Section 22 read with Section 16 and 17 of SICA, 1985 would continue to operate against the proceedings initiated before a Civil Court, when the company revived and became a non sick industrial company during its pendency? (ii) What would be the legal effect of two decrees suffered by the company both in the Trial Court and the First Appellate Court and whether it would be a nullity in the eye of law, by virtue of express bar under Section 22 of SICA,1985? (iii) When the decree found to be hit by a statutory bar, what would be the effect of a subsequent development which would take away the debarring provision? Is there any difference in the legal position, when the decree not attained **RSA.No.652 of 2004** **5** finality? (iv) What would be the legal effect of absence of equal and efficacious alternative remedy attached/connected with a statutory bar? (v) What would be the jurisdiction with a civil court when there is an express statutory bar and whether it is not within the jurisdiction of a civil court to decide the application of a statutory bar ? 5. It was submitted by Sri.G.Unnikrishnan that when there is a bar either express or implied, a decree granted by the Civil Court is a nullity and may not have any legal consequences by relying on the decisions of the Apex Court in (i) _**Managing Director, Bhoruka Textiles Limited v. Kashmiri Rice Industries (2009 (7) SCC 521)**_ (ii) _**Ghansyam Sarda v. M/s Shiv Shankar Trading Co. and others (AIR 2015 SC 403)**_ (iii) _**Chief Engineer, Hydel Project and others v. Ravinder Nath and other (2008 KHC 4142) (**_ iv _**) Reheja Universal Limited v. NRC Limited and others (2012 (4) SCC 148)**_ and a Division Bench **RSA.No.652 of 2004** **6** decision of this Court in _**Hameed v. Ittoop (1970**_ ## _**KLT 501).**_ 6. Whether an adjudication or a decree by a Civil Court would be a nullity depends on the question whether there is 'inherent lack of jurisdiction' with the Civil Court in passing a decree on a disputed subject matter. The expression 'inherent lack of jurisdiction' is not synonymous with a statutory bar. The expression 'inherent lack of jurisdiction' stands for complete lack of jurisdiction either inherent or otherwise. Lack of territorial or pecuniary jurisdiction would also constitute 'inherent lack of jurisdiction'. In the case of statutory bar debarring exercise of jurisdiction by a Civil Court will not come under the purview of 'inherent lack of jurisdiction', but would satisfy only 'lack of jurisdiction' by virtue of the debarring provision. When the debarring provision found to be inoperative, or when there is no equal and efficacious alternative remedy provided, it will **RSA.No.652 of 2004** **7** not take away the inherent jurisdiction with the Civil Court under Section 9 of Code of Civil Procedure, 1908. The Civil Court shall have the jurisdiction to try all suits of civil nature except of which their cognizance is either expressly or impliedly barred. It is further subjected to certain other limitations - based on pecuniary and territorial jurisdiction. But statutory ouster by a debarring provision annexed with equal and efficacious alternative remedy will not take away the inherent jurisdiction and hence cannot be a case of 'lack of inherent jurisdiction', if the Civil Court has exercised its jurisdiction either ignoring or rejecting the debarring provision or without noticing the debarring provision. It may be a case of 'lack of jurisdiction', and certainly not a case of 'lack of inherent jurisdiction' and the decree passed in the former case would be a voidable one and may not be a nullity in its very inception, though in the later one, the decree would be a nullity and would **RSA.No.652 of 2004** **8** fall within the sweep of 'lack of inherent jurisdiction'. A decree which suffers 'inherent lack of jurisdiction' cannot be equated with a decree which suffers a statutory bar. The decree of Trial Court and the First Appellate Court, hence, cannot be construed as a nullity in its very inception. The expression nullity stands for nonest in the eye of law. Both the decree of Trial Court and the First Appellate Court, though suffers the express bar under Section 22 of the SICA,1985, the subsequent development of revival of the company, would take away the application of bar under Section 22 of the SICA, 1985, inspite of the fact that the express bar thereunder was available and operative, as on the date of suit, decree of Trial Court and decree of the First Appellate Court. It is during the pendency of this appeal, the company was revived and re-transformed into a non-sick Industrial Company and thereby brought out of the bar under Section 22 of SICA,1985. The scheme under Section 17 also extinguished by efflux **RSA.No.652 of 2004** **9** of time and by revival of the company as a non sick Industry. Then the question comes, what would be the legal effect of revival of the company on a subsequent event, which would take away the application of debarring provision under Section 22 of the SICA,1985 and whether it would legalize the decrees passed by the Courts below, though initially, there was an express bar of jurisdiction of Civil Court. If the decree is a nullity in its very inception, there cannot be any revival or subsequent legalization, but if it is not a nullity in its very inception, though may be a voidable one, it can be validated and legalized by a subsequent act. The question whether a decree is a nullity in its very inception or not lies on the distinction between the expression “lack of jurisdiction” and “inherent lack of jurisdiction” and its respective legal consequences thereof. 7. To resolve the issue, it is necessary to ascertain what actually constitute a statutory bar, either express or implied. A statutory bar would **RSA.No.652 of 2004** **10** operate only when it is annexed/connected with an equal and efficacious alternative remedy. In the absence of a forum to redress the grievance or a statute conferring a right instead of adjudicating the dispute, there cannot be a functional bar either by statute or otherwise. The express or an implied bar will operate and bind on the parties only when the same is annexed with an equal and efficacious alternative remedy or by conferring a right on the party instead of getting the grievance redressed through any forum. The basic principle governing a statutory bar either by a special enactment or otherwise is resting on the availability under the enactment (either special or otherwise) a provision for redressing the grievance by way of an equal and efficacious alternative remedy or by conferring a right in substitution of remedy. In the absence of an equal and efficacious alternative remedy or conferment of a right in substitution of an efficacious remedy, there cannot be a functional debarring provision. **RSA.No.652 of 2004** **11** It is within the jurisdiction of civil court to ascertain the availability of an alternative remedy or a right conferred in substitution of a remedy so as to determine the application of a debarring provision. ## 8. The Apex Court in _**Chief Engineer, Hydel**_ _**Project and Others v. Ravinder Nath and Others (2008 KHC 4142)**_ by relying on the earlier decision in _**Bahrein Petroleum Co.Ltd. v. P.J.Pappu, (1966 (1) SCR 461=AIR 1966 SC 634),**_ had settled the legal position by extracting the relevant portion of the judgment which is extracted below for reference:- _“It is well settled and needs no authority that where a court takes upon itself to exercise a jurisdiction it does not possess, its decision amounts to nothing. A decree passed by a court having no jurisdiction is non est and its invalidity can be set up whenever it is sought to be enforced as a foundation for a right, even at the stage execution or in collateral proceedings. A decree passed by a court without jurisdiction is a coram non judice.”_ (Emphasis supplied) ## 9. The Apex Court in _**Managing Director, Bhoruka**_ _**Textiles Limited's**_ case (supra) has considered the **RSA.No.652 of 2004** **12** application of Section 16 and 22 of the SICA,1985 and the question whether the jurisdiction of Civil Court is ousted. Paragraph 12 of the said judgment is extracted below for reference: _“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 judice. It is 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 v. Chaman Paswan this Court held: (AIR 1954 SCC 340, Para.6)_ _“6...It is a fundamental principle well established that a decree passed by a court without jurisdiction is a nullity, and 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.”_ _(Emphasis supplied)_ 10. Two legal aspects emerges from the above said judgments that a decree of a Civil Court or a Tribunal 'lacking inherent jurisdiction' would be a **RSA.No.652 of 2004** **13** nullity and that defect of jurisdiction, whether it is pecuniary or territorial, strikes at the very authority of the court to pass any decree and such a defect cannot be cured even by consent of parties. 11. The legal position was again reiterated by the Apex Court in **Ghanshyam Sarda v. M/s. Shiv Shankar Trading Co.and others (AIR 2015 SC 403)** while dealing with a batch of cases, that BIFR (Board for Industrial and Financial Reconstruction) has exclusive jurisdiction over Sick Company by virtue of operation of Section 22(1),26 and 32(1) of SICA,1985 in exclusion of Civil Court jurisdiction over the matter, by referring the decision rendered in _**Managing Director, Bhoruka Textiles Limited's**_ case (supra). From the discussion, the necessary corollary is that a decree which suffers an 'inherent lack of jurisdiction' either territorial or pecuniary would alone stand as a nullity, but a decree which suffers only a statutory bar is not a nullity in **RSA.No.652 of 2004** **14** its very inception though it would be voidable at the hands of opposite party either in the same proceedings or in a collateral proceedings. Till that time, the legal consequences would flow out of the decree unless the same was brought under challenge at any stage of litigation, execution or any collateral proceedings. The argument that the decree passed by the Trial Court confirmed in appeal is a nullity in its very inception, no legal consequences would flow out of it and not capable of revival, cannot be sustained, though it is permissible to challenge the validity of the decree on account of any debarring provision, at any stage of litigation or in a collateral proceedings. 12. Though there is an express bar, the Court cannot easily infer that there is ouster of jurisdiction. The Apex Court had the occasion to consider whether the ouster of Civil Court jurisdiction can be readily inferred in _**Rajasthan State Road Transport Corporation v. Bal Mukund Bairwa (2009 KHC 4524- 2009 (4) SCC 299).**_ It **RSA.No.652 of 2004** **15** cannot be readily inferred unless the jurisdiction is barred expressly or impliedly by a statute. 13. On an earlier occasion in _**ITI Ltd v.**_ _**Siemens Public Communications Network Ltd-2002 KHC**_ _**1279: AIR 2002 SC 2308: 2002(5) SCC 510,**_ the Apex Court laid down the legal position that the exclusion of Civil Court jurisdiction cannot be easily inferred, as there is always a strong presumption that the Civil Courts have the jurisdiction to decide all disputes of civil nature. 14. It was held in _**Saraswati v. Lachanna - 1994 KHC 1107:1994(1) SCC 611,**_ that when the statute does not create a right nor provides any remedy or creates a right or liability and provides no forum for adjudication of a dispute arising out of such right or liability, ouster of Civil Court's jurisdiction shall not be readily inferred. 15. It is well within the jurisdiction of the Court to test and determine the existence of a valid statute governing ouster of jurisdiction, for **RSA.No.652 of 2004** **16** that purpose the Civil Court can look into the question of the validity of debarring provision in the touch stone of alternative remedy provided. In the absence of alternative remedy or conferment of a right in substitution of remedy, the Civil Court jurisdiction would not stand as debarred and it can proceed with the suit and to adjudicate the dispute and in that situation, there cannot be an 'inherent lack of jurisdiction' and as such the decree, if any, passed would not stand as a nullity in its very inception. The subsequent development transforming the company as a non-sick industrial unit by bringing the company out of the bar under Section 22 of the SICA, 1985, would validate the decree passed by both the courts below being not a nullity in its very inception. The decree is only a voidable one, capable of getting legal sanctity by a subsequent development. **==> picture [397 x 12] intentionally omitted <==** complete bar ousting jurisdiction of Civil Court but it is only a partial bar demanding compliance **RSA.No.652 of 2004** **17** of certain requirement that no suit shall lie or be proceeded with further, except with the consent of the board or as the case may be, the appellate authority. When there is non compliance of the said requirement, the proceedings and everything attached to it and even the right to sue would stand as suspended by virtue of operation of Section 22(3) of the Act. The effect of cessation of declaration also dealt with under clause (b) of Sub Section (4) to Section 22 that:- _(i) any right, privilege, obligation or liability so remaining suspended or modified, shall become revived and enforeable as if the declaration had never been made, and_ _(ii) any proceeding so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed._ 17. The period in which the suspension was in force under Section 22(3) was allowed to be excluded in the enforcement of any right, **RSA.No.652 of 2004** **18** privilege, obligation or liability in the computation of period of limitation under Sub section (5) to Section 22 of the SICA, 1985. This would show that there is a partial statutory restraint/partial statutory bar alone included under Section 22 of SICA,1985 and on cessation of the suspension, “all the right, privilege, obligation or liability so suspended or modified shall become revived and enforceable, as if the declaration had never been made.” It further permits to proceed with the proceedings on cessation of declaration/suspension from the stage, it was stopped or suspended. In the instant case admittedly the company was revived as a non sick industry and hence the declaration made under subsection (3) would stand as terminating the suspension of proceedings. The suit instituted and the decree passed by both the Trial Court and the First Appellate Court, during the pendency of the scheme under Section 17 of the Act would revive and become valid on termination of the suspension, as **RSA.No.652 of 2004** **19** there is only a partial bar of the jurisdiction of Civil Court under Section 22 of the SICA,1985. 18. A 3 Judge Bench of Apex Court in _**Reheja Universal Limited v. NRC Limited and Others (2012**_ _**(4) Supreme Court Cases 148)**_ had considered the scope and legal impact of debarring provision, Section 22 read with section 16 and 17 of SICA, 1985, and laid down the legal position in Paragraph 26 of judgment, which is extracted below for reference: _“26. This Court, while dealing with the scope of Section 22 read with Section 16 and 17 of SICA 1985, took the view that all proceedings for execution, distress or the like against the properties of the company would automatically be suspended and could not continue without the consent of BIFR. This Court held as under: [Gram Panchayat case, (1990) 2 SCC 440) paras 10-11]_ _“10. In the light of the steps taken by the Board under Sections 16 and 17 of the Act, no proceedings for execution, distress or the like proceedings against any of the properties of the company shall lie or be proceeded with further except with the consent of the Board. Indeed, there would be automatic suspension of such proceedings against the company's properties. As soon as the inquiry under Section 16 is ordered by the Board, the various proceedings set out under Sub-_ **RSA.No.652 of 2004** **20** _section (1) of Section 22 would be deemed to have been suspended._ _11. It may be against the principles of equity if the creditors are not allowed to recover their dues from the company, but such creditors may approach the Board for permission to proceed against the company for the recovery of their dues/outstanding/overdues or arrears by whatever name it is called. The Board at its discretion may accord its approval for proceeding against the company. If the approval is not granted, the remedy is not - extinguished. It is only postponed. Sub section (5) of Section 22 provides for exclusion of the period during which the remedy is suspended while computing the period of limitation for recovering the dues”_ _(_ Emphasis supplied) 19. The Division Bench decision relied on by the appellant in _**Hameed v. Ittoop (1970 KLT 501)**_ is really standing on a different footing dealing with the prohibitory clause under Section 11(3) of the Kerala Building (Lease and Rent Control) Act,1965. It is only a statutory prohibition against initiating a proceeding within a particular period and not dealing with ouster of jurisdiction. The substantial questions involved are answered **RSA.No.652 of 2004** **21** accordingly. There is no merit in the appeal. The appeal fails,dismissed. No costs. **Sd/-** **P.SOMARAJAN** ## **JUDGE** MSP //TRUE COPY// P.A. TO JUDGE