BIFR protection in money recovery suits extends to company-related borrowing executed by directors on behalf of the sick company.

Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 imposes a statutory bar on the continuation of money recovery suits and allied proceedings against a sick industrial company while BIFR inquiry, scheme preparation, implementation, consideration, or appeal is pending, unless the Board or appellate authority consents. The text notes that where the debtor company is registered before the BIFR and the borrowing documents show that the debt was incurred for the company, a director or managing director who executed promissory notes on the company's behalf may also fall within that protection. On that basis, recovery proceedings were described as liable to be stayed and refusal of stay as unsustainable.

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Issues: Whether proceedings in suits for recovery of money could be stayed under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, where the debtor company was registered before the BIFR and the petitioner had signed the promissory notes as managing director/director on behalf of the company.

Analysis: Section 22(1) imposes a statutory bar on the continuation of suits for recovery of money and allied proceedings against a sick industrial company during the pendency of inquiry, scheme preparation, consideration, implementation, or appeal before the BIFR, except with the consent of the Board or the appellate authority. The materials showed that the company had been registered with the BIFR and that proceedings were pending. The promissory notes and surrounding circumstances indicated that the borrowing was for the company and that the petitioner had executed the documents in his capacity as director/managing director on behalf of the sick industrial company. In that situation, the protection under section 22 extended to him as well, since recovery could not proceed against persons who were co-obligants or connected with the company debt without BIFR consent.

Conclusion: The suits were liable to be stayed, and the order refusing stay was unsustainable.

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