M/S. PATHEJA BROS. FORGING AND STAMPING AND ANR. versus I. C. I. C. I. LTD. AND ORS.

Citation: [2000] SUPP. 1 S.C.R. 662 · Decided: 24-07-2000 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
M/S. PATHEJA BROS. FORGING AND STAMPING AND ANR. 
v. 
I.C.l.C.I. LTD. AND ORS. 
JULY 24, 2000 
B 
[S.P. BHARUCHA, M.B. SHAH AND RUMA PAL, JJ.] 
Sick Industrial Companies (Special Provisions) Act, 1985: 
S.22-lndustrial company-Suspension of legal proceedings-Reference 
C u/s. 15 registered-Suit for recovery of loans pending against the company 
and guarantors-Stay of proceedings declined by High Court in respect of 
properties belonging to guarantors-Held, suit for enforcement of guarantees 
cannot be proceeded with unless consent as required u/S:22 is obtained 
D 
In a suit for recovery of money filed before the High Court by respondent 
no.I against the appellant-company and its guarantors, including appellant 
no. 2, an ad interim order was passed by Single Judge. Meanwhile the 
reference made by the appellant-company to be declared a sick undertaking 
under the Sick Industrial Companies (Special Provisions) Act, 1985 was 
registered. Consequently, the Single Judge directed the Court Receiver not 
E to take possession pursuant to the interim order. But, as regards the 
properties belonging to the guarantors, the Single Judge declined to vacate 
the interim order. The appeal filed before the Division Bench was dismissed. 
Aggrieved, the company and one of its guarantors filed the present appeal 
It was contended for the appellants that in view of Section 22 of the Act, 
F no suit for enforcement of any guarantee in resr..ect of any loan or advance 
granted to the industrial company could be proceeded with except with the 
consent of the Board for Industrial and Financial Re.:onstruction or the 
Appellate Authority under the Act. For the respondents, it was contended that 
the suit contemplated by Seetion 22 was a suit only against the industrial 
G company and that it was only when the industrial company was itself the 
guarantor or it was sued by a guarantor on subrogation that the provisions of 
Section 22 would apply. 
H 
Allowing the appeal, the Court 
HELD: I.I. Section 22 of the Sick Industrial Companies (Special 
662 
PATHEJA BROS. FORGING AND STAMPING v. I.C.I.C.I. 
663 
Provisions) Act, 1985, clearly provides that no suit for the enforcement of a A 
guarantee in respect of any loan or advance granted to the industrial company 
concerned will lie or can be proceeded with without the consent of the Board 
for Industrial and Financial Reconstruction or the Appellate Authority under 
the Act It is not possible to read the relevant words in Section 22 as meaning 
that only a suit against the industrial company will not lie without such B 
consent There is no requirement in Section 22 that, to be covered thereby, a 
suit for the enforcement of a guarantee in respect of a loan or advance to the 
industrial company should be against the industrial company. 
[664-B-C; 665-B-C) 
Mada/sa International Ltd. and Ors. v. Central Bank of India, AIR C 
(1998) Bombay 247, overruled. 
1.2. The relevant words in Section 22 are crystal clear. There is no 
ambiguity therein. When the words ofa legislation are clear, the court must 
give effect to them as they stand and cannot demur on the ground that the 
legislature must have intended otherwise. [666-B-C) 
D 
1.3. Apart from the fact that the language of Section 22 is explicit, the 
scheme would provide for the repayment of the loan or advance and, therefore, 
would take within its ambit the claim on the guarantee; the question of 
proceeding with the suit against the guarantor would not arise. On the other 
hand, ifthe industrial company cannot be revived by a scheme, the embargo E 
under section 22 would cease to operate. [666-G I 
1.4. It is true that there is no provision in the Act which empowers the 
Board to order the guarantor not to dispose of his assets, but Section 22 
provides that the suit would lie or be proceeded with after the consent of the 
Board has been obtained. It would, therefore, be open to the claimant on a F 
guarantee to obtain such consent from the Board. [667-A-B) 
1.5. Since an appeal in respect of the appellant-company is pending 
before the Appellate Authority under the Act, the suit of respondent no. 1 for 
the enforcement of the guarantees in respect of the loans granted to the 
appellant cannot be proceeded with unless consent as required by Section 22 G 
is obtained. ( 667-G) 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4111 of2000. 
From the Judgment and Order dated 21.7.99 of the Bombay High Court 
in A. L No. 627 of 1999 and S. No.

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