INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED Vs. DHANESH D RUPARELIA OF INDIAN INHABITANT

JUDGEMENT

(1.) THE matter was heard before Notification was issued under Recovery of Debts due to Banks and Financial Institutions Act, 1993, and placed for orders, hence the present order.

(2.) IN Summons for Judgment taken out by the plaintiffs, a financial institution, defendants have filed their reply and have raised various defences. One of the averments in the affidavit was that Suit No. 1856 of 1996 filed against D. K. Chemoplast Limited, the principal debtor be stayed as it was declared sick by B. I. F. R. The present defendants are guarantors for the said loan. Though the point was not specifically raised at the hearing, the issue arose as to whether the suit against guarantors who have given guarantee to a company against whom proceedings are pending under Sick Industrial Companies (Special Provisions) Act, 1985 or orders passed therein can be continued with or proceeded with. On behalf of the plaintiffs, their learned Counsel points out that the matter is no longer in issue as it is covered by the judgment of the Division Bench of this Court in the case of (Madalsa International Ltd. and others v. Central Bank of India), 1998 (4) Bom. C. R. 124 : 1998 Bank. J. (Bom.)644. It is pointed out that in para 22 of the said judgment the very issue which has arisen here has been decided and the Division Bench whilst answering the issue has observed as under:--

(3.) THE question therefore is whether the issue is concluded by the judgment of the Division Bench of this Court. The appeal arose from an order of a learned Single Judge. The learned Judge dismissed the Chamber Summons for stay of execution on the ground that on mere filing of proceedings by the company. Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 was not attracted. The other contention before the learned Single Judge was that proceedings against the guarantors should be stayed was not decided. The Division Bench in appeal in para 8 was considering the issue whether proceedings for stay of execution is required to be allowed. What therefore was directly in issue was whether the decree could be executed against the guarantors. There was no suit pending either against the company or the Guarantors as the suit had already been decreed and the Chamber Summons was taken out for stay of the proceedings in execution. The reference was rejected by B. I. F. R. However, at the stage of hearing the appeal before the Division Bench the company had filed an appeal under section 25 of the Sick Industrial Companies (Special Provisions) Act, 1985 which was pending. The findings of the learned Single Judge that the Chamber Summons had to be dismissed as mere filing of reference did not result in stay of proceedings was upheld. As an appeal had been preferred and as proceedings had to be stayed if an appeal was pending the Division Bench proceeded to hear and dispose off the matter. A few additional facts which arose in Madalsa International Ltd. (supra) need to be stated to find out what was being decided. A consent decree had been taken out against three defendants. In terms of the consent decree, if the defendants committed default or any breach of any terms, Court Receiver was appointed as Receiver with powers amongst others to sell the securities. Defendant No. 3 under the consent decree was to create a mortgage of property so also other defendants. As no payment was made and as the decree was breached, the decree holder moved the Receiver to take forcible possession of the properties for which he was appointed as Receiver with power to sell. At that point of time section 22 (1) had been amended and section 22 (1) as amended read as under:-Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding any thing contained in the Companies Act, 1956 (1 of 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 or 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 and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority. "