Sick company protection under the SICA suspends pre-reference recovery proceedings and renders parallel enforcement infructuous.

Section 22(1) of the Sick Industrial Companies Act suspends recovery proceedings against a company declared sick under Section 17 in respect of dues pending when the statutory process begins. Liabilities arising after the relevant sick-company orders are treated separately from pre-reference dues. Because the recovery action here concerned dues that arose before the reference, the statutory embargo applied and independent recovery could not continue outside the scheme under the Act. The challenge to rejection of permission to sell detained material therefore became infructuous once the sick-company declaration and suspension provisions operated.

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Issues: Whether recovery proceedings against a company declared sick under the Sick Industrial Companies (Special Provisions) Act, 1985 stood suspended under Section 22(1), and whether the petition challenging the rejection of permission to sell detained material survived after such declaration.

Analysis: Once the Board for Industrial and Financial Reconstruction declared the company a sick unit under Section 17, Section 22(1) operated to suspend legal proceedings for recovery of dues pending on the date of initiation of the proceedings and the passing of the order. The Court distinguished liabilities accruing after the relevant statutory orders from liabilities that had arisen before commencement of the sick-company proceedings. Since the recovery action in the present matter related to pre-reference dues, the statutory embargo applied.

Conclusion: The petition was rendered infructuous and the recovery action could not proceed independently of the scheme framed under the Act.

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