Substituted creditor can continue completed insolvency proceedings, and guarantor protection under SICA does not bar them.

A substituted petitioning creditor may continue insolvency proceedings where the original creditor had already obtained a valid insolvency notice and the debtor's non-compliance had completed the act of insolvency; the substitution does not interrupt the completed statutory foundation for the petition. The bar in section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 applies to a suit, not to insolvency proceedings or an insolvency notice against a guarantor, and cannot be expanded beyond the statutory text. On that basis, the insolvency petition was maintainable.

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Issues: (i) whether a substituted petitioning creditor could continue insolvency proceedings founded on an act of insolvency already completed; (ii) whether insolvency proceedings against a guarantor were barred by section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.

Issue (i): whether a substituted petitioning creditor could continue insolvency proceedings founded on an act of insolvency already completed.

Analysis: The claim of the original petitioning creditor had been crystallised and an insolvency notice had validly been issued. Once the debtor failed to comply and the statutory period expired, the act of insolvency stood completed. The substituted petitioning creditor stepped into the shoes of the original creditor and was entitled to proceed on that completed act of insolvency. The statutory definition of creditor was wide enough to include a decree holder, and the requirement under section 13(2) was satisfied by proof of the debt and the act of insolvency.

Conclusion: The substitution was valid and the insolvency petition could be maintained by the substituted petitioning creditor.

Issue (ii): whether insolvency proceedings against a guarantor were barred by section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: The protection under section 22(1) was held to extend, in the context of a guarantor, only to a suit and not to every kind of proceeding. An insolvency notice or insolvency proceeding was not a suit. The later Supreme Court exposition confirmed that the provision could not be expanded to give guarantors wider protection than the language of the statute permitted.

Conclusion: The bar under section 22(1) did not apply to the insolvency proceedings against the guarantor.

Final Conclusion: The insolvency petition was maintainable in law and was allowed.

Ratio Decidendi: Where an act of insolvency has already been completed, a substituted creditor may continue the insolvency proceedings, and the statutory bar protecting guarantors of sick industrial companies does not extend beyond a suit to insolvency proceedings.

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