Section 22(1) bars recovery suits against sick companies during BIFR proceedings and does not give an automatic right to withdraw court deposits.

Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 bars continuation of a money recovery suit against a sick industrial company during pending BIFR proceedings unless consent is obtained from the Board or appellate authority. The High Court applied that statutory protection and stayed the recovery suit. It also held that the pendency of rehabilitation proceedings did not give the applicant an automatic right to withdraw or recover amounts already deposited in court pursuant to a prohibitory order, so the prayer for refund failed and the deposited amount was directed to remain in fixed deposit until disposal of the BIFR proceedings.

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Issues: (i) Whether the applicant was entitled to refund of the amount deposited in court; (ii) whether the suit proceedings were liable to be stayed under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.

Issue (i): Whether the applicant was entitled to refund of the amount deposited in court.

Analysis: The applicant relied on its status as a sick industrial company and on pending reference before the Board for Industrial and Financial Reconstruction, but the court held that the amount had been brought into court pursuant to the prohibitory order and that the applicant could not, as of right, obtain its release merely because rehabilitation proceedings were pending. The same statutory protection available to the applicant also prevented an automatic return of the deposited amount in its favour.

Conclusion: The applicant was not entitled to refund of the deposited amount.

Issue (ii): Whether the suit proceedings were liable to be stayed under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: Section 22(1) bars continuation of a suit for recovery of money against an industrial company during the pendency of BIFR proceedings unless consent is obtained from the Board or the appellate authority. The court accepted that the provision applied on the facts and that the recovery suit could not proceed further without such consent.

Conclusion: The suit proceedings were required to be stayed.

Final Conclusion: The application did not succeed on the prayer for refund, and the suit was stayed with the deposited amount directed to remain in fixed deposit until disposal of the BIFR proceedings.

Ratio Decidendi: Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 creates a statutory bar on the continuation of a money recovery suit against a sick industrial company during pending BIFR proceedings without the requisite consent, and the protective benefit of that provision does not confer an automatic right to withdraw funds already deposited in court.

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