2000 (7) TMI 852 - SC - Indian Laws

Whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 covers a suit against the guarantor of a loan or advance that has been granted to the concerned industrial company? Held that - Appeal allowed. Analysing the relevant words in section 22 it is found that they are clear and unambiguous and that they provide that no suit for the enforcement of a guarantee in respect of any loan or advance granted to the concerned industrial company will lie or can be proceeded with without the consent or the Board or the appellate authority. When the words of a legislation are clear, the Court must give effect to them as they stand and cannot demur on the ground that the Legislature must have intended otherwise. Therefore, the first respondent s suit for the enforcement of the guarantees in respect of the loans granted to the first appellant cannot be proceeded with unless consent as required by section 22 is obtained.

Summary

Issues:
Interpretation of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 regarding suits against guarantors of loans granted to industrial companies.

Analysis:
1. The main issue in this appeal was whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 applies to a suit against the guarantor of a loan or advance granted to an industrial company.

2. The Court examined the language of section 22, which clearly states that no suit for the enforcement of a guarantee in respect of any loan or advance granted to the concerned industrial company can proceed without the consent of the Board or the appellate authority under the Act.

3. The Court rejected the argument that section 22 only applies to suits against the industrial company itself. It emphasized that the language of the section does not require the suit to be against the industrial company for the provision to apply.

4. The Court also considered the provisions of sections 17(3), 18(2), and 22A of the Act. It noted that while these sections deal with the continuation of proceedings against the industrial company, section 22 specifically addresses the enforcement of guarantees related to loans or advances.

5. The Court referenced a previous judgment by the Bombay High Court, which held that section 22 applies to suits against guarantors as well. The Court agreed with this interpretation, stating that the language of the section is clear and unambiguous.

6. Ultimately, the Court concluded that the first respondent's suit for the enforcement of guarantees against the loans granted to the first appellant cannot proceed without the necessary consent as required by section 22.

7. Therefore, the appeal was allowed, and the order under challenge was set aside, with no specific costs awarded in the judgment.