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Our Legal Correspondent

CHENNAI, April 8

THE Madras High Court has permitted the sale by Sundaram Finance Ltd, Chennai, of machinery of Coimbatore Pioneer Mills Ltd by suspending the operation of the order dated February 21, 2003 of the single judge, who had made absolute the interim stay granted on January 2 and January 10.

The First Bench, comprising Chief Justice, Mr B. Subhashan Reddy, and Mr Justice K. Govindarajan, while suspending the stay directed that the sale process of the machinery of the mills shall go on, but only confirmation of the sale shall be kept in abeyance.

In the main writ petitions, the Kamaraj National Labour Organisation and other unions challenged the order dated April 23, 2002, of the Board for Industrial and Financial Reconstruction (BIFR) granting permission to sell the machinery of the Mills, which was the subject matter of six hire purchase agreements entered into between the Mills and the 4th respondent, Sundaram Finance Ltd.

According to the various unions, they came to know of the BIFR order to sell the machinery after the Advocate Commissioner issued the sale notice. Coimbatore Pioneer Mill was employing about 1,000 workers and the very purpose of the BIFR was to rehabilitate a mill. When such was the purpose, the 1st respondent (BIFR) was not justified in passing the order granting permission to the secured creditors to initiate/pursue their recovery suits subject to the condition mentioned therein. At that stage, the unions filed the writ petitions and obtained a stay of the BIFR order.

While ordering the interim stay absolute, the single judge said that it was clear that once machineries were sold, the very purpose of rehabilitation under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 would be defeated and the workers would lose their jobs. Therefore, it would be against public interest.

In their writ appeal against the order of the single judge, Sundaram Finance contended that the hire purchase agreements entered into by them with the Mills recognised and described them as the owner of the machinery and the 3rd respondent (Coimbatore Pioneer Mills) as the hirer. All the rights of the owner had been clearly spelt out, which included the right of repossession of the machinery in the event of a default by the 3rd respondent in payment of the hire purchase instalments.

It was submitted by the appellant that they were only seeking to repossess and sell their own machinery and it was a well-settled principle of law that the recovery and sale of HP machinery could not be stayed under Section 22 of the Act of 1985. This principle had been upheld by the apex court and this High Court.

It was puerile on the part of the 1st respondent (Kamaraj National Labour Organisation) to try and link the BIFR proceedings with the repossession of the machinery by the appellant.

The appellant was not bound by the order of the 2nd respondent (BIFR) since what they sought to repossess was only their own assets and not the assets of the sick mills. In any event, a perusal of the order dated April 23, 2002 of the BIFR would clearly go to show that the appellant had not featured in the direction given by the BIFR.

The appellant further contended that they were a leading non-banking finance company having over two lakh depositors. The appellant owed a duty to all their depositors and were answerable to them. If defaulters such as the 3rd respondent were allowed to go scot-free, it would directly affect the financial condition of the appellant.

It was a fundamental principle of law, the appellant said, that a proceeding of a court having coordinate jurisdiction could not be stayed or interfered with by another court having co-ordinate jurisdiction and such orders, if passed, would result in judicial anarchy.

The machinery that was now sought to be sold formed only a fraction of the entire array of machinery installed in `A', `B' & `C' units of the Mills. Therefore, the sale of the machinery would not in any way affect the rehabilitation of the sick mills.

The single judge, the appellant submitted, erred in construing the appellant company to be a `secured creditor' totally overlooking the fact that the appellant company was the owner of the machinery and therefore had a paramount right over the machinery. The appellant prayed for suspension of the order of stay dated February 21, 2002.

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