Section 22(1) interpretation conflict on guarantor protection under sick company law referred to a larger Bench.

Divergent co-ordinate Bench interpretations of section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 created uncertainty over whether the protection for guarantors applies only to suits or also to recovery proceedings. One line of authority confined the bar to suits, while another read "suit" more broadly to support the rehabilitation process of the sick company. Because the conflicting views remained unresolved within existing precedent, the Court considered it appropriate to refer the matter to a larger Bench for authoritative settlement of the interpretation issue.

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Issues: Whether the conflict between earlier co-ordinate Bench decisions on the scope of section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, particularly the distinction between "suit" and "proceeding" and the protection available to guarantors, required reference of the matter to a larger Bench.

Analysis: The Court noted that one line of authority had held that the protection given by section 22(1) to guarantors extended only to suits and not to proceedings for recovery of money, while another line had read the expression "suit" more broadly to include proceedings in order to protect the rehabilitation process of a sick company. Since both views were taken by co-ordinate Benches and the inconsistency had not been resolved within the existing jurisprudence, the Court found that the anomaly could not be ignored. In such a situation, where two divergent interpretations of the same statutory provision continued to operate, a reference to a larger Bench was considered appropriate to settle the law.

Conclusion: The matter was referred to a larger Bench for resolution of the conflict in interpretation.

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