2001 (3) TMI 929 - HC - Companies Law

Summary

Issues:
Interpretation of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 for protection against recovery proceedings and enforcement actions without consent of the Board for Industrial and Financial Reconstruction (BIFR).

Detailed Analysis:

1. Protection under Section 22 for the Company:
The petitioner sought protection under Section 22 of the SICA against recovery proceedings without the consent of BIFR. The company had approached BIFR, and it was argued that Section 22 applies to protect the company and its properties. The court held that Section 22 only shields the properties of the industrial company from distraint and does not prevent authorities from investigating or taking legal actions unrelated to the company's properties.

2. Protection for Directors and Officers:
The petitioner also sought protection for its directors and officers under Section 22. However, the court rejected this argument, stating that the protection under Section 22 is limited to the industrial company's properties and does not extend to its directors or officers. Directors were deemed to occupy a fiduciary position and were not considered guarantors of the company or its properties.

3. Legislative Intent and Interpretation:
The court emphasized that the legislative intent of Section 22 is to safeguard the interests of the company and its properties, as well as guarantors, from recovery actions. The court highlighted that the wording of Section 22 is clear and unambiguous, indicating that the protection does not cover directors or officers. The court held that the protection under Section 22 is restricted in scope and does not prevent investigations or criminal proceedings against directors, officers, or the company.

4. Application of Precedents:
The court distinguished the case of Patheja Bros. Forgings & Stamping v. ICICI Ltd., stating that it was not applicable to the present case. The court clarified that the protection under Section 22 should be strictly construed and limited to cases specified in the section, without extension to directors or officers.

5. Conclusion and Dismissal of Writ Petition:
Ultimately, the court dismissed the writ petition, ruling that the protection under Section 22 does not extend to directors or officers of the company. The court held that the legislative intent was to shield the company and its properties, not its directors or officers, from recovery actions. Consequently, the writ petition was rejected, and no costs were awarded.

By N.V. BALASUBRAMANIAN, J.