Sick company moratorium bars loan recovery proceedings during pending BIFR reference without Board consent.

Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 imposes a statutory moratorium on recovery proceedings, enforcement of security, and enforcement of guarantees once a reference before the Board for Industrial and Financial Reconstruction is pending. In this context, loan-dues recovery initiated under the Madhya Pradesh recovery law could not continue without prior consent of the Board. The protection applies to recovery of outstanding loan liabilities of an industrial company and is not displaced by authorities dealing with unrelated tax claims. The operative effect is that such proceedings must remain stayed unless the Board grants consent.

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Issues: Whether, during the pendency of a reference before the Board for Industrial and Financial Reconstruction, recovery proceedings for loan dues initiated under the Madhya Pradesh recovery law could continue without the Board's consent under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: Section 22 creates a statutory bar on proceedings for recovery of money, enforcement of security, and enforcement of guarantees in respect of loans or advances granted to an industrial company while an inquiry under section 16 is pending. The provision is intended to operate as a protective moratorium once the reference is registered and inquiry is pending. The recovery action in question was for outstanding loan dues, not a tax claim, and therefore did not fall within the limited category of claims excluded by the authorities relied upon by the respondents. The cited decisions on the point of sick-company protection support the view that such recovery proceedings cannot continue without prior consent of the Board.

Conclusion: The recovery proceedings were barred by section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and were required to remain stayed unless consent of the Board was obtained.

Ratio Decidendi: Where a reference under the Sick Industrial Companies (Special Provisions) Act, 1985 is pending, proceedings for recovery of loan dues or enforcement of a guarantee against the industrial company cannot proceed without the consent of the Board.

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