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TaxTMI 
TaxTMI 
TaxTMI 
2003 (2) TMI 338
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....to PICUP. In addition the appellants executed bonds of guarantee in consideration for the grant of loans to the company. 3. On 1st December 1997, the Company was declared sick by the Board for Industrial and Financial Reconstruction (BIFR) in terms of section 3(1)(o) of the SICA. The BIFR appointed IFCI as the operating agency under section 17(3) of the Act "to examine the viability and submit its report for revival of the company". While the proceedings before the BIFR were pending, on 6th February 2002 three separate notices of demand were served on the appellants as personal guarantors in respect of the loans granted to the company by PICUP. The total amount claimed was Rs. 8,90,84,259.06p. Each of the appellants was called upon to pay the demand within 30 days along with the interest at the rates specified in the notice falling which PICUP said that it would take legal measures to recover its outstanding dues from each guarantor. The appellants replied to the notice stating that because of the decisions of this Court on the scope of section 22(1) of the Act, PICUP could not enforce its demand against the appellants. PICUP rejected the stand of the appellants and called upon th....
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....1972. Under the U.P. Act a distinction is drawn between a 'proceeding' and a 'suit'. 8. Section 3 specifically states that no suit for the recovery of any sum shall lie in the Civil Court against any such person to whom a certificate was issuable under section 3(1). It is submitted that since a suit was already barred by the U.P. Act, the question it being further barred under section 22(1) did not arise. It is also pointed out that in section 22(1) of SICA, Parliament has drawn a distinction between the word 'proceeding' and 'suit'. It is pointed out that this Court in its decision in Maharashtra Tubes Ltd.'s case (supra) had construed the word 'proceeding' to include proceedings under the State Financial Corporation Act. The section was subsequently amended by the introduction of the prohibition relating to the filing of a suit inter alia to enforce a guarantee in respect of loans advanced to a sick industrial company. It is argued that had the Parliament intended to include proceeding like those under the U.P. Act within the word 'suit', it would have used the word 'proceeding' and not consciously used the word 'suit'. The respondents have relied upon the decision of this Court....
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....me) as arrears of land revenue and further that it shall not be necessary for the Corporation to take recovery proceedings against the said Company/Borrower before taking recovery proceedings under the said Act against the Guarantors. The Guarantors further agree for the applicability of relevant provisions of the State Financial Corporation Act, 1951." 11. There is therefore nothing in the contracts which can in any way be construed as contrary to the joint and severally liability created under section 128. 12. Under the guarantees PICUP could raise and enforce a demand against the appellants under the U.P. Public Demands (Recovery of Dues) Act, 1972 (the UP Act). Section 3 of the U.P. Act provides for the issuance of a certificate to the Collector by a financial corporation like PICUP in respect of sums from persons specified in sub-section (1) of section 3 requesting that such sums together with the costs of the proceedings should be recovered as if it were an arrear of land revenue. Sub-section 2 of section 3 of the U.P. Act provides that the Collector on receiving the certificate shall proceed to recover the amount stated therein as an arrear of land revenue. 13. Therefore,....
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....contained in the Companies Act, 1956, or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company on for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof shall lie or be proceeded with further except with the consent of the Board or, as the case may be, the Appellate Authority." 17. In Maharashtra Tubes Ltd.'s case (supra), when a question arose whether a State Financial Corporation could take action against an industrial concern under section 29 and/or section 31 of the State Financial Corporation Act, 1951, notwithstanding the bar of section 22 of SICA, this Court held that the expression 'proceeding' in section 22(1) should not be limited to 'legal proceedings' as understood in the narrow sense but would include proceedings under sections 29 and 31 of the State Financial Corporation Act, it was said : ". . . The purpose and object of this provision is clearly to await the outcome of the reference made to the BIFR for the revi....
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.... against the industrial concern. The law has not left them without a remedy. We are, therefore, of the opinion that the word 'proceedings' in section 22(1) cannot be given a narrow or restricted meaning to limit the same to legal proceedings. Such a narrow meaning would run counter to the scheme of the law and frustrate the very object and purpose of section 22(1) of the 1985 Act." (p. 158) 18. It appears that there were three reasons why this Court construed that the word 'proceeding' as including action which may be taken under section 29 of the State Financial Corporation Act : 1. The recovery proceedings were against an industrial company, the revival of which was one of the objects of the Act; 2. The use of the omnibus expression "or the like" after the word "proceeding"; 3. The fact that the entire Scheme as contained in sections 16 to 19 of SICA would be rendered nugatory and the process short-circuited of State Financial Corporations were allowed to recover their dues from the assets of the company. 19. After this decision was rendered, section 22(1) was amended by the Sick Industrial Companies (Special Provisions) Amendment Act (12 of 1994). The following words wer....
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....e word 'suit' has been given in Pandurang R. Mandlik's case (supra) but in the context of section 11 of the Code of Civil Procedure. This is what the Court said: "In its comprehensive sense the word 'suit' is understood to apply to any proceeding in a court of justice by which an individual pursues that remedy which the law affordes. The modes of proceedings may be various but that if a right is litigated between parties in a court of justice the proceeding by which the decision of the court is sought may be a suit". 24. According to these decisions, a suit is an action taken in a Court of law. 25. Having regard to the judicial interpretation of the word 'suit', it is difficult to accede to the submission of the appellants that the word 'suit' in section 22(1) of the Act means anything other than some form of curial process. 26. Apart from the semantic difference between the words 'suit' and 'proceeding' there is the absence of expensive words 'or the like' which appear after the expression 'proceedings', after the word 'suit'. The exclusion of such 'omnibus expression' after the word 'suit' must be given some weight in interpreting the word. As held by this Court in Escorts L....
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....r would step into the shoes of the creditor vis-a-vis the company to the extent of the liability met. 31. It is true that this Court in Patheja Bros. Forgings & Stampings (supra) construed the 1994 amendment to section 22(1) to hold : ". . . For our purpose, therefore, the relevant words are : "no suit ..... for the enforcement ..... of any guarantee in respect of any loans or advance granted to the industrial company" shall lie without the consent of the Board of the appellate authority. The words are crystal clear. There is no ambiguity therein. It must, therefore, be held that no suit for the enforcement of a guarantee in respect of a loan or advance granted to the industrial company concerned will lie or can be proceeded with, without the sanction of the Board or the appellate authority under the said Act." (p. 548) 32. This is in keeping with the well established principle of statutory interpretation that where the language of the provision is explicit the language of the statute must prevail. 33. The appellants have, however, sought to draw sustenance from the following passage in the judgment : ". . . The argument on behalf of the first respondent is that while this p....