Section 22 protection blocks recovery suits where a sick company's liability is covered by the rehabilitation scheme.

Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 barred continuation of a money recovery suit against a sick industrial company where the claimed liability was covered by, or integrally linked with, a draft rehabilitation scheme. The court treated the existence of a pending rehabilitation process and the running-account nature of the dealings as decisive, and held that the suit could not proceed merely because the exact amount remained disputed or not finally crystallised. Recovery proceedings therefore required consent from the Board or Appellate Authority before they could continue.

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Issues: Whether a suit for recovery of money could continue against a company declared sick by the Board for Industrial and Financial Reconstruction when the liability claimed was covered by the draft rehabilitation scheme and the company had sought protection under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: Section 22(1) bars proceedings for recovery of money against a sick industrial company where an inquiry under Section 16 is pending, a scheme under Section 17 is under preparation or consideration, or a sanctioned scheme is under implementation, unless the Board or Appellate Authority consents. The decisive factor is whether the claim or liability is covered by the rehabilitation scheme. On the admitted facts, a substantial part of the debt stood reflected in the draft rehabilitation scheme, the parties were operating a running account, and the remaining component also formed part of the interlinked monetary dispute arising from the same business dealings. In that situation, the suit could not be allowed to proceed merely because the exact figure was disputed or because the entire amount had not yet been finally crystallized.

Conclusion: Section 22(1) was attracted, and continuation of the money recovery suit without BIFR consent was impermissible.

Final Conclusion: The appeal succeeded and the order refusing protection under Section 22(1) was set aside, with the legal bar against further prosecution of the recovery suit operating in favour of the appellant.

Ratio Decidendi: Where the liability sought to be recovered is covered by, or is integrally linked with, a rehabilitation scheme of a sick industrial company, Section 22(1) operates to suspend recovery proceedings until the Board or Appellate Authority grants consent.

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