Case: M/S.Patheja Bros.Forgings&amp;Stamping &amp;Anr Vs. I.C.I.C.I. Ltd.

On 31st March, 1999 the first respondent filed a suit inter alia against the first appellant to recover the amounts of the loans that had been given to the latter. To the said suit were impleaded the guarantors (including the second appellant) and the guarantees were sought to be enforced. A Notice of Motion was taken out in the suit for ad interim relief, which was granted on 1st April, 1999.3. On 8th April, 1999 the reference made by the first appellant to be declared a sick undertaking within the meaning of the said Act was registered.4. On 9th April, 1999 it was brought to the notice of the learned single Judge hearing the Notice of Motion that the reference had been registered; in view of that, he directed the Court Receiver not to take possession pursuant to the ad interim order, if not already taken. On 3rd May, 1999 it was pointed out to the learned single Judge that certain properties mentioned in an exhibit to the plaint were not the properties of the first defendant and that, consequently, the order of ad interim relief would not apply to them. It was argued that these properties belonged to the guarantors and, therefore, considering the language of Section 22 of the said Act, the suit in respect of these properties could not be proceeded with. The attention of the learned single Judge was, on the other hand, drawn to the judgment of a Division Bench of the High Court in the case of Madalsa International Ltd. and others v. Central Bank of India, AIR 1998 Bombay 247. It had there been held that the provisions of Section 22 would not apply in so far as guarantors were concerned. In view of that judgment, the learned single Judge declined to vacate the ad interim order in so far as the guarantors properties were concerned. The order of the learned single Judge was carried in appeal, and a Division Bench, relying upon the judgment in Madalsa International Ltd., summarily dismissed the appeal. That is the order under challenge before us.

Court's reasoning:
It remains to deal with the judgment of the Division Bench of the Bombay High Court in Madalsa International Ltd. The Division Bench found no ground to so read Section 22 as to hold that a suit against the guarantor also stands suspended. It said, "The guarantor could be absolute third parties or directors of an industrial company. However, in both cases if would be the guarantors, whether third parties or directors, who would be affected personally; and we see no reason to interpret the section in such a manner that apart from the properties of the industrial company, the legislature intended to protect the personal interest of the guarantors as proceedings against guarantor and their personal property would not affect the revival of the industrial company in any manner whatsoever. In the circumstances the words "of any guarantee in respect of any loans, or advance granted to the industrial company" in the context will have to be read as the guarantee given by the industrial company itself and nonehave analysed the relevant words in Section 22 and 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 of 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 intendedof today, there is an appeal in respect of the first appellant pending before the Appellate Authority under the said Act. Therefore, the first respondents 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.