Insolvency notice based on arbitral award against a guarantor held maintainable despite Sick Industrial Companies Act protection arguments.

Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 was treated as not barring arbitral proceedings in the manner argued, and an insolvency notice founded on an award against a guarantor was held maintainable. The court noted that the applicant had not challenged the award under section 34 of the Arbitration and Conciliation Act, 1996, and accepted that the statutory protection could extend to suits against guarantors but not to execution proceedings against them. An insolvency notice was characterised as an independent proceeding, and invalidity of the underlying award was not a ground for setting it aside under the Presidency Towns Insolvency Act. The challenge was rejected.

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Issues: Whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 barred arbitral proceedings and prevented an insolvency notice from being founded on an award against a guarantor, and whether the insolvency notice could be set aside on the ground that the award was allegedly invalid.

Analysis: Section 22 was held not to bar arbitral proceedings in the manner urged, and the applicant had not challenged the award under section 34 of the Arbitration and Conciliation Act, 1996. The protection under section 22 was treated as extending to suits against guarantors, but not to execution proceedings against them, and an insolvency notice was treated as an independent proceeding rather than a continuation of the original suit. The grounds for setting aside an insolvency notice under section 9(5) of the Presidency Towns Insolvency Act did not include the alleged invalidity of the underlying award, and discretionary interference was found unwarranted in view of the applicant's conduct.

Conclusion: The challenge to the insolvency notice was rejected and the notice of motion was not allowed.

Ratio Decidendi: Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 does not bar an insolvency notice founded on an award against a guarantor, and an insolvency notice is an independent proceeding that cannot be set aside on a ground not covered by the statutory grounds unless justice clearly requires it.

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