2000 (10) TMI 903 - HC - Companies Law

Summary

Issues:
1. Validity of recovery certificate issued by the Assistant Registrar of Co-operative Societies.
2. Enforcement of recovery certificate against the guarantor in light of the Sick Industrial Companies (Special Provisions) Act, 1985.
3. Dismissal of insolvency notice and subsequent insolvency petition against the guarantor.
4. Interpretation of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 in the context of insolvency proceedings.
5. Compliance with legal procedures in insolvency proceedings and adherence to the principles of natural justice.

Issue 1: Validity of Recovery Certificate
The recovery certificate issued by the Assistant Registrar of Co-operative Societies on 5-8-1997 was challenged on the grounds that it could not be enforced against the guarantor as the principal debtor had not become impossible for recovery. The High Court rejected this contention, emphasizing that the recovery certificate was not conditional and held the liability of the companies and the guarantor as joint and several. The Court noted that the issue was not raised before the Single Judge and was not present in the appeal memo, ultimately dismissing the argument.

Issue 2: Enforcement of Recovery Certificate Against Guarantor
Regarding the enforcement of the recovery certificate against the guarantor in light of the Sick Industrial Companies (Special Provisions) Act, 1985, the appellant argued that the certificate could not be enforced due to the principal debtor being declared a sick undertaking. However, the Court found that the appellant failed to present a strong case for interference with the order of the Single Judge, as the insolvency petition was not contested and the grounds of appeal did not support the argument raised by the appellant's counsel. Consequently, the Court dismissed the appeal.

Issue 3: Dismissal of Insolvency Proceedings
The insolvency notice and subsequent insolvency petition against the guarantor were challenged by the appellant. The Court noted that the insolvency petition was made absolute due to the lack of opposition from the appellant during the proceedings. The appellant's contentions in the Notice of Motion for setting aside the order of adjudication were considered, but the Court found no merit in the arguments and upheld the decision to dismiss the insolvency proceedings.

Issue 4: Interpretation of Section 22 of SICA
The Court interpreted Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, in the context of insolvency proceedings against a guarantor of a loan to an industrial company. Relying on relevant case law, the Court concluded that the bar under Section 22 applied specifically to suits and not to other proceedings like insolvency notices. The Court upheld the decision of the Single Judge in dismissing the appellant's contentions based on Section 22.

Issue 5: Compliance with Legal Procedures
The Court emphasized the importance of following legal procedures and ensuring adherence to the principles of natural justice in insolvency proceedings. It was noted that the insolvency petition was made absolute in the absence of opposition from the appellant, and subsequent challenges raised by the appellant were found to lack merit. The Court affirmed the decisions of the lower courts and dismissed the appeals and related motions accordingly.

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