Section 22 moratorium under sick company law can extend to bank guarantees tied to recovery of dues, creating a triable defence.

Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 was read broadly to cover not only guarantees for loans or advances but also bank guarantees given for amounts payable by a sick company to a beneficiary. On that approach, invocation of the guarantee for recovery of money arising from supply of goods was treated as raising a substantial issue on maintainability, and that issue was considered a triable defence sufficient to justify leave to defend. The separate ground based on Government undertaking clearance was not pressed. The stated effect was that section 22(1) applied to the guarantee in question and unconditional leave to defend was available.

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Issues: Whether section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 barred the suit and the invocation of the bank guarantee, and whether the defendant was entitled to unconditional leave to defend.

Analysis: The bar under section 22(1) was held to extend not only to guarantees in respect of loans or advances but also to guarantees furnished for payment due to the beneficiary from a sick company. The provision was read broadly and harmoniously to advance its object of keeping proceedings in abeyance and preventing depletion of the sick company's liabilities. Since the claim arose from supply of goods and the bank guarantee was connected with recovery of money from the sick company, the defence raised a substantial question on maintainability. That question was treated as a triable issue, sufficient to justify leave to defend. The second ground based on Government undertaking clearance was not pressed.

Conclusion: Section 22(1) applied to the bank guarantee in question, and the defendant was entitled to unconditional leave to defend.

Ratio Decidendi: A bank guarantee invoked to recover money due from a sick industrial company can fall within the bar of section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, and such a bar may furnish a triable issue entitling the defendant to leave to defend.

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