Section 22 sick company protection barred auction and sale confirmation while appeal remained pending

The protective bar under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 was held to apply once the Section 15 process had been set in motion and an appeal under Section 25 remained pending. Coercive action against the sick company's assets during that period was treated as contrary to the statutory restraint. On that basis, the auction proceedings conducted while the appeal was pending were held to lack legal authority, and the sale confirmation was treated as equally infirm and liable to be set aside.

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Issues: Whether the pendency of an appeal before the Appellate Authority for Industrial and Financial Reconstruction attracted the protective bar under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 so as to invalidate the auction proceedings and confirmation of sale.

Analysis: The protective regime under the Sick Industrial Companies (Special Provisions) Act, 1985 was held to operate automatically once the statutory process under Section 15 had been set in motion and an appeal under Section 25 remained pending. The Court treated the earlier stage of registration and pendency of appeal as sufficient to attract the statutory restraint, and held that any coercive action against the assets of the sick company during that period would be contrary to Section 22. On that basis, the auction proceedings undertaken while the appeal was pending were found to be without legal authority. The Court also treated the impugned sale confirmation as a consequence of the same illegality.

Conclusion: The auction sale proceedings and the order confirming sale were held to be void and liable to be set aside, in favour of the petitioner.

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