Case Note & Summary
The dispute arose from a suit filed by ICICI Ltd against M/s Patheje Bros. Forgings & Stamping and others to recover loan amounts. The suit included guarantors, and an interim relief was granted. Subsequently, the first appellant was declared a sick undertaking under The Sick Industrial Companies (Special Provisions) Act, 1985. The learned single judge noted that the suit could not proceed against the guarantors without the consent of the Board as per Section 22 of the Act. The Division Bench dismissed the appeal, relying on a previous judgment which stated that Section 22 did not apply to guarantors. The appellants contended that Section 22 clearly prohibits suits for enforcement of guarantees without Board consent. The respondent argued that Section 22 only applied to suits against the industrial company itself. The court analyzed the language of Section 22 and concluded that it explicitly prohibits any suit for enforcement of guarantees without consent, regardless of whether the suit is against the industrial company or the guarantor. The court found no ambiguity in the statute and emphasized that the legislative intent must be respected. Consequently, the appeal was allowed, and the order under appeal was set aside, with no costs awarded.
Headnote
A) Sick Industrial Companies Act - Applicability of Section 22 - Enforcement of Guarantees - The Sick Industrial Companies (Special Provisions) Act, 1985, Section 22 - The court held that no suit for the enforcement of a guarantee in respect of a loan granted to an industrial company can proceed without the consent of the Board or Appellate Authority, clarifying that the language of Section 22 is clear and unambiguous. The court emphasized that the provisions apply to guarantees irrespective of whether the suit is against the industrial company or the guarantor (Paras 1-4).
Issue of Consideration
Whether Section 22 of The Sick Industrial Companies (Special Provisions) Act, 1985 covers a suit against the guarantor of a loan granted to the industrial company.
Final Decision
The Supreme Court allowed the appeal, set aside the order under appeal, and ruled that the suit for enforcement of guarantees could not proceed without the consent of the Board as required by Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
Law Points
- Sick Industrial Companies Act
- 1985
- Section 22
- enforcement of guarantees
- consent of Board
- legal proceedings against guarantors
