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TMI Blog2002 (5) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... f an amount of Rs. 1,41,64,771 against the defendants under the summary procedure as provided for under order XXXVII of the Code of Civil Procedure, 1908 ( the Code ). In the said suit, an ex parte decree was passed by this Court by judgment and order dated 18-8-1998. Thereafter, the defendant Nos. 1 and 2 appeared and filed an application under order IX rule 13 of the Code praying for setting aside the ex parte decree. The aforesaid applications registered as I.A. Nos. 10368 and 10370 of 1998 are pending for consideration. However, thereafter, another application was filed by the defendants being I.A. No. 3114 of 1999 under section 22 which was filed on the basis of the reference communicated to the defendant No.1/company by the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely, section 22(1), which for proper understanding is extracted below : " Suspension of legal proceedings, contracts, etc. (1) 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 anything 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, distre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as the guarantor is concerned, what is contemplated under section 22 is stay of further proceedings of 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, except with the consent of the Board. 8. The Supreme Court in the decision in Patheja Bros. Forgings Stamp-ing v. ICICI Ltd. AIR 2000 SC 2553 1 interpreted the expression with which I am concerned in the present applications. For answering the present issue which arises for my consideration, the following expression "no suit for the recovery of money... shall lie or be proceeded with further, except with the consent of the Board" is rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and, therefore, the guarantor cannot claim the same benefit as that of the principal borrower, namely, the company which is declared sick. 10. Similar argument was also advanced before the Supreme Court in the case of Patheja Bros. Forgings Stamping ( supra ). In the said decision, it was held that although section 22A empowers the Board to direct the industrial company not to dispose of, except with its consent, any of its assets and that there was no provision in the Act which empowered the Board to order the guarantor of a loan or advance to an industrial company not to dispose of its assets, but, still section 22 provides that the suit would lie or could be proceeded with after consent of the Board has been obtained and, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration. There is a clear embargo in proceeding with a suit in which a guarantee is also sought to be enforced as provided for under section 22. 14. So far as the defendant No.1 is concerned, the same being a sick company is the principal borrower. So far as the said company is concerned, the suit cannot be proceeded with for, it is clearly stated in the first part of the provisions of section 22, that 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 could be proceeded with, except with the consent of the Board. Therefore, even the execution proceeding as against the defendant No. 1 cannot be proceeded with without obtaining such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the execution petition by the plaintiff is the judgment and decree passed in the suit where the application for setting aside ex parte decree is pending for consideration. If the execution proceeding pending against the defendant No. 1 is allowed to be continued even though the application for setting aside the ex parte decree is pending for consideration, the same would amount to effecting enforcement of the guarantee given by the guarantor in respect of the loan or advance granted to the industrial company. It is also to be noted that such suit or execution proceeding could be initiated or proceeded with after obtaining the consent of the Board. 17. In my considered opinion, in the facts and circumstances of the present case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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