Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | 1985-s. 22- Sick Industrial Companies (Special Provisions) Act |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Matter Referred to Larger Bench |
Headnote | Sick Industrial Companies (Special Provisions) Act, 1985 - s. 22 - Expression 'suit' whether includes other proceedings before legal forum - Divergent views of co-ordinate Benches - Matter referred to larger Bench - State Financial Corporation Act, 1951 - s. 31(1)(aa).The first appellant-Company obtained financial assistance amounting to Rs.1.42 lacs from respondent. It created a security for repayment of amount by hypothecating plant and machinery. On the same day, the second appellant executed a personal guarantee for repayment of the loan amount in case of default by the appellant-company. The first appellant company defaulted in repayment of the amount. Inspite of several notices demanding the payment, the first appellant failed to make payment.The respondent issued a notice to second appellant to pay the entire amount by invoking the personal guarantee given by the second appellant. The second appellant also did not make the payment as demanded and consequently respondent filed a petition against the second appellant under s. 31(1)( aa) of the State Financial Corporation Act, 1951 for enforcing the personal guarantee given by the said appellant.Single Judge of the High Court held that the liability of the guarantor was independent of that of the principal debtor and accordingly the guarantee could be invoked. On appeal, the Division Bench of the High Court held that the provision of s.22 of SICA, as amended in 1994, did not prohibit any proceeding, other than a suit for enforcement of any security against the guarantor. On such finding and also upon holding that the liability of the guarantor was co-extensive with the principal debtor and that the creditor was not required to exercise his right as a mortgagee before proceeding against the guarantor, the Division Bench dismissed the appeal.In appeal to this Court, appellants contended that the decision in *Kailash Nath Agrawal's case had been rendered by this Court in the context of interpretation of the expressions 'suit' and 'proceedings' used in s.22(1) of SICA, 1985. In construing the said two expressions, this Court was of the view that while the expression 'proceedings' used in s.22(1) would have to be confined to companies alone, the expression 'suit' had been introduced by amendment to extend the protective cover of s.22 to guarantors as well; that the purpose for which such amendment had been effected, namely, to extend the protective cover of s.22 to guarantors also, would be rendered meaningless if coercive action continued to be taken against guarantors who could even be the Directors of the company in question; that the continuing ambiguity was sought to be explained in the **Paramjit Singh Patheja case wherein it was explained that the expression 'suit' would have to be understood in a larger context to include other proceedings as well before a legal forum. |
Judge | Honble Mr. Justice Altamas Kabir |
Neutral Citation | 2007 INSC 1172 |
Petitioner | Zenith Steel Tubes And Industries Ltd. And Anr. |
Respondent | Sicom Limited |
SCR | [2007] 12 S.C.R. 413 |
Judgement Date | 2007-11-21 |
Case Number | 5347 |
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