TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 bars suits and proceedings for enforcement of guarantees given in respect of loans or advances granted to an industrial company. (ii) Whether the earlier Division Bench decision could be treated as concluding that such suits against guarantors were not stayed. (iii) Whether the pending proceedings could be transferred to the Debt Recovery Tribunal in view of the quantum involved.
Issue (i): Whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 bars suits and proceedings for enforcement of guarantees given in respect of loans or advances granted to an industrial company.
Analysis: The expression in section 22 was examined in the light of the scheme of the statute and the law of guarantee under the Indian Contract Act, 1872. A contract of guarantee requires a principal debtor, surety and creditor, and the guarantor is a person distinct from the principal debtor. Reading the provision purposively, the words referring to guarantees in respect of loans or advances granted to the industrial company were held to cover guarantees furnished by persons other than the company for such loans or advances. The section was therefore construed as protecting the industrial company and extending the statutory bar to suits enforcing such guarantees.
Conclusion: The bar under section 22 applies to proceedings for enforcement of guarantees given in respect of loans or advances to the industrial company, and such proceedings cannot continue without the requisite consent.
Issue (ii): Whether the earlier Division Bench decision could be treated as concluding that such suits against guarantors were not stayed.
Analysis: The earlier decision was held to have dealt directly only with execution proceedings and the meaning of the word "suit" in that context. The question whether a suit on a guarantee was independently barred was not directly in issue and the relevant provisions of the Indian Contract Act, 1872 were not considered. The observations relied upon were therefore treated as obiter and not as the controlling ratio decidendi.
Conclusion: The earlier Division Bench decision did not conclude the present question and did not prevent a contrary view on the scope of section 22.
Issue (iii): Whether the pending proceedings could be transferred to the Debt Recovery Tribunal in view of the quantum involved.
Analysis: Once the statutory bar on continuation of the proceedings was recognised, the matter was directed to be placed before the forum having jurisdiction over claims exceeding the relevant monetary threshold. The transfer direction was consequential to the decision that the suit could not proceed in the court where it was pending.
Conclusion: The proceedings were directed to be transferred to the Debt Recovery Tribunal.
Final Conclusion: The judgment held that enforcement proceedings on guarantees connected with loans or advances to the sick industrial company were stayed, the contrary earlier view was not treated as binding on that point, and the matter was shifted to the appropriate tribunal.
Ratio Decidendi: A guarantee for a loan or advance granted to an industrial company falls within section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, so proceedings to enforce such a guarantee cannot continue while the statutory bar operates.
TaxTMI 
