TaxTMI 
TaxTMI 
2007 (11) TMI 402
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....security for repayment of the amount by hypothecating its plant and machinery and creating an equitable mortgage of its factory premises situated in the abovementioned village. A loan agreement was executed on 30-3-1993 for repayment of the loan in various instalments. On the same day, the second appellant executed a personal guarantee for repayment of the loan amount in case of default by the appellant-company. 3. The appellant-company committed several defaults in repayment of the loan amount compelling the respondent to issue a notice on 16-10-1998 calling upon the appellant-company to pay the overdue amount within a stipulated period. Despite such notice, the appellant-company failed to make payment and accordingly, by a further notice dated 10-1-1999 the respondent called upon the appellant-company to repay the entire amount due and payable to the respondent by 3-2-1999 failing which the possession of the assets of the appellant-company would be taken on 5-2-1999. 4. Since, despite such notice the appellant-company failed and neglected to pay the entire amount as demanded, the respondent issued a notice to the appellant No. 2 on 13-6-2000 calling upon him to pay the enti....
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....ourt which is the subject-matter of this appeal. 7. Appearing in support of the appeal, Mr. Shekhar Naphade, learned Senior Advocate, submitted that both the learned Single Judge and the Division Bench of the High Court had erred in giving a narrow meaning to the word 'suit' as used in section 22 of SICA. He submitted that the context in which the expression 'suit' had been used in section 22 of the aforesaid Act made such expression all pervasive to include other proceedings as well before a court or other authority empowered to recover debts and other dues against the company. It was urged that in the case of Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd. [1993] 2 SCC 144, it had been held that the expression "proceedings" in section 22(1) of SICA must be widely construed and could not be confined to legal proceedings understood in the narrow sense of proceeding in a Court of law or a legal Tribunal for attachment and sale of the debtor's property. However, since the said decision could be applied to companies only and not to guarantors, the Legislature amended the provisions of section 22(1) so as to extend the protection given to companies....
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.... object of section 22 of SICA in protecting guarantors from legal proceedings pending a reference to BIFR by the principal debtor was to ensure that a scheme for rehabilitation would not be defeated by isolated proceedings adopted against the guarantors of a sick company. In order to achieve such purpose, it was imperative that the expression "suit" in section 22 be given its plain meaning, namely, any proceedings adopted for realisation of a right vested in a party by law. 10. Mr. Naphade then submitted that the Bombay High Court had wrongly relied upon the decision of this Court in Kailash Nath Agrawal v. Pradeshiya Industrial & Investment Corpn. of U.P. Ltd. [2003] 4 SCC 305^1, wherein the decision rendered by this Court in the Maharashtra Tubes Ltd.'s case (supra) as also in Patheja Bros. Forgings & Stamping's case (supra) were distinguished and it was held that in both the cases while considering the effects of the amendment to section 22(1) of SICA, the Courts were concerned with 'suits' which had been dealt with in the case of Patheja Bros., and not with 'proceedings' indicated in the first part of section 22(1) of the 1985 Act. Mr. Naphade added that the decision in the ....
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....he instant case the respondent had filed an application not for enforcement of any security but for claiming only the amount of guarantee the same could not be enforced against the appellant No. 2. According to Mr. Naphade the appellant No. 2 has not given any other security which could be proceeded against by the respondent. 13. Mr. Naphade submitted that the Bombay High Court had no jurisdiction to entertain the application made under section 31(1)(aa) of the Act and the order passed there above was a nugity. 14. It was also submitted that I.A. No. 1 of 2007 was filed in the special leave petition for leave to place on record additional grounds as set out in the application and prayed that the same be allowed to be placed on record by way of additional grounds. Inasmuch as, such prayer was objected to on behalf of the respondent, Mr. Naphade referred to the decision of this Court in the Management of State Bank of Hyderabad v. Vasudev Anant Bhide [1969] 2 SCC 491, wherein while considering as to whether a claim was barred under article 137 of the Limitation Act, an objection was taken that such ground had not been raised either before the Labour Court or even in the special....
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....section 22(1) of SICA. It was in that context that this Court distinguished the earlier decision in Patheja Bros. Forgings & Stamping's case (supra) and upon holding that since the Legislature had expressly chosen to make a distinction between suits for recovery of money and enforcement of guarantees and proceedings for the recovery of money, such distinction had to be given effect to. It was held that even under the amended provisions only a limited protection had been afforded to guarantors with regard to the recovery of dues by way of suit, but not by way of proceedings, and, accordingly, a proceeding for recovery of money against a guarantor would stand outside the protection afforded under section 22(1) of the 1985 Act. 18. It was urged that in the instant case, a situation similar to that in Kailash Nath Agrawal's case (supra) had arisen, since the proceeding had been initiated against the guarantor under the relevant provisions of the State Financial Corporations Act, 1951, which stood outside the purview of section 22(1) of SICA. 19. Mr. Savla submitted that although the decision in Kailash Nath Agrawal's case (supra) was not referred to by the Division Bench of the B....