Guarantors need consent under Sick Industrial Companies Act before loan suits

The Court held that section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 applies to suits against guarantors of loans granted to industrial companies. It concluded that the suit for enforcement of guarantees against the loans cannot proceed without the necessary consent as mandated by the Act. Consequently, the appeal was allowed, the challenged order was set aside, and no specific costs were awarded.

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Issues:
Interpretation of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 regarding suits against guarantors of loans granted to industrial companies.

Analysis:
1. The main issue in this appeal was whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 applies to a suit against the guarantor of a loan or advance granted to an industrial company.

2. The Court examined the language of section 22, which clearly states that no suit for the enforcement of a guarantee in respect of any loan or advance granted to the concerned industrial company can proceed without the consent of the Board or the appellate authority under the Act.

3. The Court rejected the argument that section 22 only applies to suits against the industrial company itself. It emphasized that the language of the section does not require the suit to be against the industrial company for the provision to apply.

4. The Court also considered the provisions of sections 17(3), 18(2), and 22A of the Act. It noted that while these sections deal with the continuation of proceedings against the industrial company, section 22 specifically addresses the enforcement of guarantees related to loans or advances.

5. The Court referenced a previous judgment by the Bombay High Court, which held that section 22 applies to suits against guarantors as well. The Court agreed with this interpretation, stating that the language of the section is clear and unambiguous.

6. Ultimately, the Court concluded that the first respondent's suit for the enforcement of guarantees against the loans granted to the first appellant cannot proceed without the necessary consent as required by section 22.

7. Therefore, the appeal was allowed, and the order under challenge was set aside, with no specific costs awarded in the judgment.

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